Correlation Between Visa and SPDR MSCI
Can any of the company-specific risk be diversified away by investing in both Visa and SPDR MSCI 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 SPDR MSCI 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 SPDR MSCI Europe, you can compare the effects of market volatilities on Visa and SPDR MSCI 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 SPDR MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and SPDR MSCI.
Diversification Opportunities for Visa and SPDR MSCI
Excellent diversification
The 3 months correlation between Visa and SPDR is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and SPDR MSCI Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI Europe 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 SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI Europe has no effect on the direction of Visa i.e., Visa and SPDR MSCI go up and down completely randomly.
Pair Corralation between Visa and SPDR MSCI
Taking into account the 90-day investment horizon Visa Class A is expected to generate 2.89 times more return on investment than SPDR MSCI. However, Visa is 2.89 times more volatile than SPDR MSCI Europe. It trades about 0.28 of its potential returns per unit of risk. SPDR MSCI Europe is currently generating about -0.06 per unit of risk. If you would invest 27,633 in Visa Class A on September 3, 2024 and sell it today you would earn a total of 3,875 from holding Visa Class A or generate 14.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. SPDR MSCI Europe
Performance |
| Timeline |
| Visa Class A |
| SPDR MSCI Europe |
Visa and SPDR MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and SPDR MSCI
The main advantage of trading using opposite Visa and SPDR MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, SPDR MSCI 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 SPDR MSCI will offset losses from the drop in SPDR MSCI's long position.| Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart Holdings | Visa vs. Ally Financial |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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