Correlation Between Visa and Equity Income
Can any of the company-specific risk be diversified away by investing in both Visa and Equity Income 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 Equity Income 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 Equity Income Fund, you can compare the effects of market volatilities on Visa and Equity Income 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 Equity Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Equity Income.
Diversification Opportunities for Visa and Equity Income
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and Equity is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Equity Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Income 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 Equity Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Income has no effect on the direction of Visa i.e., Visa and Equity Income go up and down completely randomly.
Pair Corralation between Visa and Equity Income
Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.37 times more return on investment than Equity Income. However, Visa is 1.37 times more volatile than Equity Income Fund. It trades about 0.09 of its potential returns per unit of risk. Equity Income Fund is currently generating about 0.06 per unit of risk. If you would invest 20,311 in Visa Class A on September 14, 2024 and sell it today you would earn a total of 11,272 from holding Visa Class A or generate 55.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Visa Class A vs. Equity Income Fund
Performance |
| Timeline |
| Visa Class A |
| Equity Income |
Visa and Equity Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Equity Income
The main advantage of trading using opposite Visa and Equity Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Equity Income 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 Equity Income will offset losses from the drop in Equity Income's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Equity Income vs. Europac Gold Fund | Equity Income vs. Global Gold Fund | Equity Income vs. Oppenheimer Gold Special | Equity Income vs. Gamco Global Gold |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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