Correlation Between Visa and Kadant
Can any of the company-specific risk be diversified away by investing in both Visa and Kadant 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 Kadant 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 Kadant Inc, you can compare the effects of market volatilities on Visa and Kadant 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 Kadant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Kadant.
Diversification Opportunities for Visa and Kadant
Very poor diversification
The 3 months correlation between Visa and Kadant is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Kadant Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kadant Inc 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 Kadant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kadant Inc has no effect on the direction of Visa i.e., Visa and Kadant go up and down completely randomly.
Pair Corralation between Visa and Kadant
Taking into account the 90-day investment horizon Visa is expected to generate 1.67 times less return on investment than Kadant. But when comparing it to its historical volatility, Visa Class A is 1.64 times less risky than Kadant. It trades about 0.19 of its potential returns per unit of risk. Kadant Inc is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 31,993 in Kadant Inc on August 23, 2024 and sell it today you would earn a total of 8,849 from holding Kadant Inc or generate 27.66% 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. Kadant Inc
Performance |
| Timeline |
| Visa Class A |
| Kadant Inc |
Visa and Kadant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Kadant
The main advantage of trading using opposite Visa and Kadant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Kadant 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 Kadant will offset losses from the drop in Kadant's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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