Correlation Between Visa and MGP Ingredients
Can any of the company-specific risk be diversified away by investing in both Visa and MGP Ingredients 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 MGP Ingredients 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 MGP Ingredients, you can compare the effects of market volatilities on Visa and MGP Ingredients 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 MGP Ingredients. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and MGP Ingredients.
Diversification Opportunities for Visa and MGP Ingredients
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Visa and MGP is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and MGP Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGP Ingredients 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 MGP Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGP Ingredients has no effect on the direction of Visa i.e., Visa and MGP Ingredients go up and down completely randomly.
Pair Corralation between Visa and MGP Ingredients
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.27 times more return on investment than MGP Ingredients. However, Visa Class A is 3.74 times less risky than MGP Ingredients. It trades about 0.35 of its potential returns per unit of risk. MGP Ingredients is currently generating about -0.15 per unit of risk. If you would invest 28,929 in Visa Class A on September 1, 2024 and sell it today you would earn a total of 2,579 from holding Visa Class A or generate 8.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Visa Class A vs. MGP Ingredients
Performance |
| Timeline |
| Visa Class A |
| MGP Ingredients |
Visa and MGP Ingredients Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and MGP Ingredients
The main advantage of trading using opposite Visa and MGP Ingredients positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, MGP Ingredients 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 MGP Ingredients will offset losses from the drop in MGP Ingredients' long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| MGP Ingredients vs. ANDREW PELLER LTD | MGP Ingredients vs. NAKED WINES PLC | MGP Ingredients vs. Superior Plus Corp | MGP Ingredients vs. NMI Holdings |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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