Correlation Between Visa and Frontline
Can any of the company-specific risk be diversified away by investing in both Visa and Frontline 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 Frontline 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 Frontline, you can compare the effects of market volatilities on Visa and Frontline 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 Frontline. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Frontline.
Diversification Opportunities for Visa and Frontline
Pay attention - limited upside
The 3 months correlation between Visa and Frontline is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Frontline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontline 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 Frontline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontline has no effect on the direction of Visa i.e., Visa and Frontline go up and down completely randomly.
Pair Corralation between Visa and Frontline
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.38 times more return on investment than Frontline. However, Visa Class A is 2.65 times less risky than Frontline. It trades about 0.35 of its potential returns per unit of risk. Frontline is currently generating about -0.21 per unit of risk. If you would invest 28,929 in Visa Class A on September 1, 2024 and sell it today you would earn a total of 2,579 from holding Visa Class A or generate 8.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Visa Class A vs. Frontline
Performance |
| Timeline |
| Visa Class A |
| Frontline |
Visa and Frontline Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Frontline
The main advantage of trading using opposite Visa and Frontline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Frontline 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 Frontline will offset losses from the drop in Frontline's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Frontline vs. DnB ASA | Frontline vs. Mowi ASA | Frontline vs. Yara International ASA | Frontline vs. Telenor ASA |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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