Correlation Between Visa and Macquarie Bank
Can any of the company-specific risk be diversified away by investing in both Visa and Macquarie Bank 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 Macquarie Bank 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 Macquarie Bank Ltd, you can compare the effects of market volatilities on Visa and Macquarie Bank 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 Macquarie Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Macquarie Bank.
Diversification Opportunities for Visa and Macquarie Bank
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Visa and Macquarie is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Macquarie Bank Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Bank 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 Macquarie Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie Bank has no effect on the direction of Visa i.e., Visa and Macquarie Bank go up and down completely randomly.
Pair Corralation between Visa and Macquarie Bank
Taking into account the 90-day investment horizon Visa Class A is expected to generate 5.42 times more return on investment than Macquarie Bank. However, Visa is 5.42 times more volatile than Macquarie Bank Ltd. It trades about 0.44 of its potential returns per unit of risk. Macquarie Bank Ltd is currently generating about 0.17 per unit of risk. If you would invest 31,604 in Visa Class A on November 1, 2024 and sell it today you would earn a total of 2,701 from holding Visa Class A or generate 8.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Visa Class A vs. Macquarie Bank Ltd
Performance |
| Timeline |
| Visa Class A |
| Macquarie Bank |
Visa and Macquarie Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Macquarie Bank
The main advantage of trading using opposite Visa and Macquarie Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Macquarie Bank 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 Macquarie Bank will offset losses from the drop in Macquarie Bank's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Macquarie Bank vs. Charter Hall Education | Macquarie Bank vs. Aristocrat Leisure | Macquarie Bank vs. Ainsworth Game Technology | Macquarie Bank vs. Beam Communications 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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