Correlation Between Visa and Federated International
Can any of the company-specific risk be diversified away by investing in both Visa and Federated International 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 Federated International 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 Federated International Small Mid, you can compare the effects of market volatilities on Visa and Federated International 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 Federated International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Federated International.
Diversification Opportunities for Visa and Federated International
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Visa and Federated is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Federated International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated International 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 Federated International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated International has no effect on the direction of Visa i.e., Visa and Federated International go up and down completely randomly.
Pair Corralation between Visa and Federated International
Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.07 times more return on investment than Federated International. However, Visa is 1.07 times more volatile than Federated International Small Mid. It trades about 0.29 of its potential returns per unit of risk. Federated International Small Mid is currently generating about 0.23 per unit of risk. If you would invest 33,392 in Visa Class A on November 29, 2024 and sell it today you would earn a total of 1,671 from holding Visa Class A or generate 5.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Federated International Small
Performance |
| Timeline |
| Visa Class A |
| Federated International |
Visa and Federated International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Federated International
The main advantage of trading using opposite Visa and Federated International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Federated International 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 Federated International will offset losses from the drop in Federated International's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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