Correlation Between Visa and ITETF
Can any of the company-specific risk be diversified away by investing in both Visa and ITETF 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 ITETF 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 ITETF, you can compare the effects of market volatilities on Visa and ITETF 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 ITETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and ITETF.
Diversification Opportunities for Visa and ITETF
Modest diversification
The 3 months correlation between Visa and ITETF is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and ITETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITETF 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 ITETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITETF has no effect on the direction of Visa i.e., Visa and ITETF go up and down completely randomly.
Pair Corralation between Visa and ITETF
Taking into account the 90-day investment horizon Visa is expected to generate 1.37 times less return on investment than ITETF. But when comparing it to its historical volatility, Visa Class A is 1.19 times less risky than ITETF. It trades about 0.09 of its potential returns per unit of risk. ITETF is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 3,311 in ITETF on September 2, 2024 and sell it today you would earn a total of 1,105 from holding ITETF or generate 33.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.58% |
| Values | Daily Returns |
Visa Class A vs. ITETF
Performance |
| Timeline |
| Visa Class A |
| ITETF |
Visa and ITETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and ITETF
The main advantage of trading using opposite Visa and ITETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, ITETF 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 ITETF will offset losses from the drop in ITETF's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| ITETF vs. Kingfa Science Technology | ITETF vs. GTL Limited | ITETF vs. Agro Phos India | ITETF vs. Indo Amines Limited |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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