Correlation Between Visa and IShares Trust
Can any of the company-specific risk be diversified away by investing in both Visa and IShares 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 IShares 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 iShares Trust, you can compare the effects of market volatilities on Visa and IShares 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 IShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and IShares Trust.
Diversification Opportunities for Visa and IShares Trust
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Visa and IShares is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust 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 IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of Visa i.e., Visa and IShares Trust go up and down completely randomly.
Pair Corralation between Visa and IShares Trust
Taking into account the 90-day investment horizon Visa Class A is expected to generate 8.25 times more return on investment than IShares Trust. However, Visa is 8.25 times more volatile than iShares Trust. It trades about 0.09 of its potential returns per unit of risk. iShares Trust is currently generating about 0.19 per unit of risk. If you would invest 22,629 in Visa Class A on November 5, 2024 and sell it today you would earn a total of 11,551 from holding Visa Class A or generate 51.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 70.04% |
| Values | Daily Returns |
Visa Class A vs. iShares Trust
Performance |
| Timeline |
| Visa Class A |
| iShares Trust |
Visa and IShares Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and IShares Trust
The main advantage of trading using opposite Visa and IShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, IShares 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 IShares Trust will offset losses from the drop in IShares Trust's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Upstart Holdings | Visa vs. Capital One Financial |
| IShares Trust vs. Vanguard Short Term Inflation Protected | IShares Trust vs. iShares TIPS Bond | IShares Trust vs. Invesco PureBeta 0 5 | IShares Trust vs. Goldman Sachs Access |
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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