Correlation Between Visa and EasyJet PLC
Can any of the company-specific risk be diversified away by investing in both Visa and EasyJet PLC 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 EasyJet PLC 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 EasyJet PLC, you can compare the effects of market volatilities on Visa and EasyJet PLC 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 EasyJet PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and EasyJet PLC.
Diversification Opportunities for Visa and EasyJet PLC
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and EasyJet is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and EasyJet PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EasyJet PLC 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 EasyJet PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EasyJet PLC has no effect on the direction of Visa i.e., Visa and EasyJet PLC go up and down completely randomly.
Pair Corralation between Visa and EasyJet PLC
Taking into account the 90-day investment horizon Visa is expected to generate 1.5 times less return on investment than EasyJet PLC. But when comparing it to its historical volatility, Visa Class A is 1.59 times less risky than EasyJet PLC. It trades about 0.1 of its potential returns per unit of risk. EasyJet PLC is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 45,780 in EasyJet PLC on September 24, 2024 and sell it today you would earn a total of 11,380 from holding EasyJet PLC or generate 24.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.22% |
| Values | Daily Returns |
Visa Class A vs. EasyJet PLC
Performance |
| Timeline |
| Visa Class A |
| EasyJet PLC |
Visa and EasyJet PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and EasyJet PLC
The main advantage of trading using opposite Visa and EasyJet PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, EasyJet PLC 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 EasyJet PLC will offset losses from the drop in EasyJet PLC's long position.| Visa vs. American Express | Visa vs. Upstart Holdings | Visa vs. Capital One Financial | Visa vs. Ally Financial |
| EasyJet PLC vs. Quadrise Plc | EasyJet PLC vs. ImmuPharma PLC | EasyJet PLC vs. Intuitive Investments Group | EasyJet PLC vs. European Metals 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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