Correlation Between Visa and London Stock
Can any of the company-specific risk be diversified away by investing in both Visa and London Stock 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 London Stock 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 London Stock Exchange, you can compare the effects of market volatilities on Visa and London Stock 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 London Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and London Stock.
Diversification Opportunities for Visa and London Stock
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Visa and London is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and London Stock Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on London Stock Exchange 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 London Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of London Stock Exchange has no effect on the direction of Visa i.e., Visa and London Stock go up and down completely randomly.
Pair Corralation between Visa and London Stock
Taking into account the 90-day investment horizon Visa is expected to generate 1.34 times less return on investment than London Stock. But when comparing it to its historical volatility, Visa Class A is 2.08 times less risky than London Stock. It trades about 0.08 of its potential returns per unit of risk. London Stock Exchange is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 13,300 in London Stock Exchange on September 12, 2024 and sell it today you would earn a total of 200.00 from holding London Stock Exchange or generate 1.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Visa Class A vs. London Stock Exchange
Performance |
| Timeline |
| Visa Class A |
| London Stock Exchange |
Visa and London Stock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and London Stock
The main advantage of trading using opposite Visa and London Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, London Stock 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 London Stock will offset losses from the drop in London Stock's long position.| Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart Holdings | Visa vs. Ally Financial |
| London Stock vs. SMA Solar Technology | London Stock vs. Highlight Communications AG | London Stock vs. Ribbon Communications | London Stock vs. Singapore Telecommunications 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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