Correlation Between Visa and Maple Leaf
Can any of the company-specific risk be diversified away by investing in both Visa and Maple Leaf 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 Maple Leaf 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 Maple Leaf Foods, you can compare the effects of market volatilities on Visa and Maple Leaf 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 Maple Leaf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Maple Leaf.
Diversification Opportunities for Visa and Maple Leaf
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Visa and Maple is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Maple Leaf Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maple Leaf Foods 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 Maple Leaf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maple Leaf Foods has no effect on the direction of Visa i.e., Visa and Maple Leaf go up and down completely randomly.
Pair Corralation between Visa and Maple Leaf
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.57 times more return on investment than Maple Leaf. However, Visa Class A is 1.76 times less risky than Maple Leaf. It trades about 0.33 of its potential returns per unit of risk. Maple Leaf Foods is currently generating about 0.19 per unit of risk. If you would invest 28,960 in Visa Class A on August 31, 2024 and sell it today you would earn a total of 2,510 from holding Visa Class A or generate 8.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Maple Leaf Foods
Performance |
| Timeline |
| Visa Class A |
| Maple Leaf Foods |
Visa and Maple Leaf Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Maple Leaf
The main advantage of trading using opposite Visa and Maple Leaf positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Maple Leaf 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 Maple Leaf will offset losses from the drop in Maple Leaf's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Maple Leaf vs. Saputo Inc | Maple Leaf vs. Forstrong Global Income | Maple Leaf vs. iShares Canadian HYBrid | Maple Leaf vs. Brompton European Dividend |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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