Correlation Between Visa and First Trust
Can any of the company-specific risk be diversified away by investing in both Visa and First Trust 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 First Trust 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 First Trust AlphaDEX, you can compare the effects of market volatilities on Visa and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and First Trust.
Diversification Opportunities for Visa and First Trust
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Visa and First is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and First Trust AlphaDEX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust AlphaDEX 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust AlphaDEX has no effect on the direction of Visa i.e., Visa and First Trust go up and down completely randomly.
Pair Corralation between Visa and First Trust
Taking into account the 90-day investment horizon Visa is expected to generate 1.4 times less return on investment than First Trust. But when comparing it to its historical volatility, Visa Class A is 1.17 times less risky than First Trust. It trades about 0.08 of its potential returns per unit of risk. First Trust AlphaDEX is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 6,185 in First Trust AlphaDEX on September 3, 2024 and sell it today you would earn a total of 4,042 from holding First Trust AlphaDEX or generate 65.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.79% |
| Values | Daily Returns |
Visa Class A vs. First Trust AlphaDEX
Performance |
| Timeline |
| Visa Class A |
| First Trust AlphaDEX |
Visa and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and First Trust
The main advantage of trading using opposite Visa and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart Holdings | Visa vs. Ally Financial |
| First Trust vs. First Trust AlphaDEX | First Trust vs. FT AlphaDEX Industrials | First Trust vs. BMO SPTSX Equal | First Trust vs. First Trust Senior |
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 Stocks Directory module to find actively traded stocks across global markets.
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