Correlation Between Visa and MicroSectors FANG
Can any of the company-specific risk be diversified away by investing in both Visa and MicroSectors FANG 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 MicroSectors FANG 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 MicroSectors FANG ETN, you can compare the effects of market volatilities on Visa and MicroSectors FANG 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 MicroSectors FANG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and MicroSectors FANG.
Diversification Opportunities for Visa and MicroSectors FANG
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and MicroSectors is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and MicroSectors FANG ETN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors FANG 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 MicroSectors FANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors FANG ETN has no effect on the direction of Visa i.e., Visa and MicroSectors FANG go up and down completely randomly.
Pair Corralation between Visa and MicroSectors FANG
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.88 times more return on investment than MicroSectors FANG. However, Visa Class A is 1.13 times less risky than MicroSectors FANG. It trades about 0.37 of its potential returns per unit of risk. MicroSectors FANG ETN is currently generating about 0.13 per unit of risk. If you would invest 28,365 in Visa Class A on August 28, 2024 and sell it today you would earn a total of 2,954 from holding Visa Class A or generate 10.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. MicroSectors FANG ETN
Performance |
| Timeline |
| Visa Class A |
| MicroSectors FANG ETN |
Visa and MicroSectors FANG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and MicroSectors FANG
The main advantage of trading using opposite Visa and MicroSectors FANG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, MicroSectors FANG 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 MicroSectors FANG will offset losses from the drop in MicroSectors FANG's long position.| Visa vs. American Express | Visa vs. Morningstar Unconstrained Allocation | Visa vs. Sitka Gold Corp | Visa vs. MSCI ACWI exAUCONSUMER |
| MicroSectors FANG vs. Invesco DWA Utilities | MicroSectors FANG vs. Invesco Dynamic Large | MicroSectors FANG vs. Invesco Dynamic Large | MicroSectors FANG vs. HUMANA INC |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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