Correlation Between Visa and Impac Mortgage
Can any of the company-specific risk be diversified away by investing in both Visa and Impac Mortgage 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 Impac Mortgage 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 Impac Mortgage Holdings, you can compare the effects of market volatilities on Visa and Impac Mortgage 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 Impac Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Impac Mortgage.
Diversification Opportunities for Visa and Impac Mortgage
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Visa and Impac is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Impac Mortgage Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Impac Mortgage Holdings 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 Impac Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Impac Mortgage Holdings has no effect on the direction of Visa i.e., Visa and Impac Mortgage go up and down completely randomly.
Pair Corralation between Visa and Impac Mortgage
Taking into account the 90-day investment horizon Visa is expected to generate 18.03 times less return on investment than Impac Mortgage. But when comparing it to its historical volatility, Visa Class A is 18.56 times less risky than Impac Mortgage. It trades about 0.09 of its potential returns per unit of risk. Impac Mortgage Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 6.00 in Impac Mortgage Holdings on September 3, 2024 and sell it today you would lose (2.00) from holding Impac Mortgage Holdings or give up 33.33% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Visa Class A vs. Impac Mortgage Holdings
Performance |
Timeline |
Visa Class A |
Impac Mortgage Holdings |
Visa and Impac Mortgage Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Visa and Impac Mortgage
The main advantage of trading using opposite Visa and Impac Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Impac Mortgage 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 Impac Mortgage will offset losses from the drop in Impac Mortgage's long position.Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart Holdings | Visa vs. Ally Financial |
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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