Correlation Between Visa and Warrior Met
Can any of the company-specific risk be diversified away by investing in both Visa and Warrior Met 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 Warrior Met 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 Warrior Met Coal, you can compare the effects of market volatilities on Visa and Warrior Met 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 Warrior Met. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Warrior Met.
Diversification Opportunities for Visa and Warrior Met
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Visa and Warrior is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Warrior Met Coal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warrior Met Coal 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 Warrior Met. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warrior Met Coal has no effect on the direction of Visa i.e., Visa and Warrior Met go up and down completely randomly.
Pair Corralation between Visa and Warrior Met
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.36 times more return on investment than Warrior Met. However, Visa Class A is 2.75 times less risky than Warrior Met. It trades about 0.1 of its potential returns per unit of risk. Warrior Met Coal is currently generating about 0.03 per unit of risk. If you would invest 21,882 in Visa Class A on November 27, 2024 and sell it today you would earn a total of 12,971 from holding Visa Class A or generate 59.28% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 99.8% |
Values | Daily Returns |
Visa Class A vs. Warrior Met Coal
Performance |
Timeline |
Visa Class A |
Warrior Met Coal |
Visa and Warrior Met Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Visa and Warrior Met
The main advantage of trading using opposite Visa and Warrior Met positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Warrior Met 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 Warrior Met will offset losses from the drop in Warrior Met's long position.Visa vs. American Express | ||
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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