Correlation Between Visa and IHeartMedia
Can any of the company-specific risk be diversified away by investing in both Visa and IHeartMedia 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 IHeartMedia 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 iHeartMedia Class A, you can compare the effects of market volatilities on Visa and IHeartMedia 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 IHeartMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and IHeartMedia.
Diversification Opportunities for Visa and IHeartMedia
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and IHeartMedia is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and iHeartMedia Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iHeartMedia Class 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 IHeartMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iHeartMedia Class has no effect on the direction of Visa i.e., Visa and IHeartMedia go up and down completely randomly.
Pair Corralation between Visa and IHeartMedia
Taking into account the 90-day investment horizon Visa is expected to generate 4.66 times less return on investment than IHeartMedia. But when comparing it to its historical volatility, Visa Class A is 5.97 times less risky than IHeartMedia. It trades about 0.32 of its potential returns per unit of risk. iHeartMedia Class A is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 170.00 in iHeartMedia Class A on August 24, 2024 and sell it today you would earn a total of 75.00 from holding iHeartMedia Class A or generate 44.12% 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. iHeartMedia Class A
Performance |
| Timeline |
| Visa Class A |
| iHeartMedia Class |
Visa and IHeartMedia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and IHeartMedia
The main advantage of trading using opposite Visa and IHeartMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, IHeartMedia 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 IHeartMedia will offset losses from the drop in IHeartMedia's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| IHeartMedia vs. Beasley Broadcast Group | IHeartMedia vs. Saga Communications | IHeartMedia vs. E W Scripps | IHeartMedia vs. Gray Television |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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