Correlation Between Visa and ETN
Can any of the company-specific risk be diversified away by investing in both Visa and ETN at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Visa and ETN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and ETN, you can compare the effects of market volatilities on Visa and ETN and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Visa with a short position of ETN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and ETN.
Diversification Opportunities for Visa and ETN
Good diversification
The 3 months correlation between Visa and ETN is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and ETN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETN and Visa is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Visa Class A are associated (or correlated) with ETN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETN has no effect on the direction of Visa i.e., Visa and ETN go up and down completely randomly.
Pair Corralation between Visa and ETN
Taking into account the 90-day investment horizon Visa is expected to generate 4.98 times less return on investment than ETN. But when comparing it to its historical volatility, Visa Class A is 14.5 times less risky than ETN. It trades about 0.33 of its potential returns per unit of risk. ETN is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 0.21 in ETN on August 31, 2024 and sell it today you would earn a total of 0.03 from holding ETN or generate 16.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. ETN
Performance |
| Timeline |
| Visa Class A |
| ETN |
Visa and ETN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and ETN
The main advantage of trading using opposite Visa and ETN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, ETN can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ETN will offset losses from the drop in ETN's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope |