Correlation Between Visa and Kensington Active
Can any of the company-specific risk be diversified away by investing in both Visa and Kensington Active 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 Kensington Active 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 Kensington Active Advantage, you can compare the effects of market volatilities on Visa and Kensington Active 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 Kensington Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Kensington Active.
Diversification Opportunities for Visa and Kensington Active
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and Kensington is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Kensington Active Advantage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kensington Active 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 Kensington Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kensington Active has no effect on the direction of Visa i.e., Visa and Kensington Active go up and down completely randomly.
Pair Corralation between Visa and Kensington Active
Taking into account the 90-day investment horizon Visa Class A is expected to generate 2.89 times more return on investment than Kensington Active. However, Visa is 2.89 times more volatile than Kensington Active Advantage. It trades about 0.35 of its potential returns per unit of risk. Kensington Active Advantage is currently generating about 0.39 per unit of risk. If you would invest 29,129 in Visa Class A on September 3, 2024 and sell it today you would earn a total of 2,536 from holding Visa Class A or generate 8.71% 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. Kensington Active Advantage
Performance |
| Timeline |
| Visa Class A |
| Kensington Active |
Visa and Kensington Active Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Kensington Active
The main advantage of trading using opposite Visa and Kensington Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Kensington Active 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 Kensington Active will offset losses from the drop in Kensington Active'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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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