Correlation Between Visa and HEG
Can any of the company-specific risk be diversified away by investing in both Visa and HEG 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 HEG 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 HEG Limited, you can compare the effects of market volatilities on Visa and HEG 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 HEG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and HEG.
Diversification Opportunities for Visa and HEG
Weak diversification
The 3 months correlation between Visa and HEG is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and HEG Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEG Limited 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 HEG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEG Limited has no effect on the direction of Visa i.e., Visa and HEG go up and down completely randomly.
Pair Corralation between Visa and HEG
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.3 times more return on investment than HEG. However, Visa Class A is 3.38 times less risky than HEG. It trades about 0.09 of its potential returns per unit of risk. HEG Limited is currently generating about -0.45 per unit of risk. If you would invest 31,488 in Visa Class A on October 20, 2024 and sell it today you would earn a total of 474.00 from holding Visa Class A or generate 1.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Visa Class A vs. HEG Limited
Performance |
| Timeline |
| Visa Class A |
| HEG Limited |
Visa and HEG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and HEG
The main advantage of trading using opposite Visa and HEG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, HEG 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 HEG will offset losses from the drop in HEG's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| HEG vs. Tips Music Limited | HEG vs. Associated Alcohols Breweries | HEG vs. Univa Foods Limited | HEG vs. ZF Commercial Vehicle |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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