Correlation Between Visa and Masimo
Can any of the company-specific risk be diversified away by investing in both Visa and Masimo 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 Masimo 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 Masimo, you can compare the effects of market volatilities on Visa and Masimo 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 Masimo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Masimo.
Diversification Opportunities for Visa and Masimo
Very poor diversification
The 3 months correlation between Visa and Masimo is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Masimo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masimo 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 Masimo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masimo has no effect on the direction of Visa i.e., Visa and Masimo go up and down completely randomly.
Pair Corralation between Visa and Masimo
Taking into account the 90-day investment horizon Visa is expected to generate 2.25 times less return on investment than Masimo. But when comparing it to its historical volatility, Visa Class A is 1.84 times less risky than Masimo. It trades about 0.18 of its potential returns per unit of risk. Masimo is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 11,402 in Masimo on November 2, 2024 and sell it today you would earn a total of 6,768 from holding Masimo or generate 59.36% 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. Masimo
Performance |
| Timeline |
| Visa Class A |
| Masimo |
Visa and Masimo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Masimo
The main advantage of trading using opposite Visa and Masimo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Masimo 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 Masimo will offset losses from the drop in Masimo's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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