Correlation Between Visa and Media Sentiment
Can any of the company-specific risk be diversified away by investing in both Visa and Media Sentiment 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 Media Sentiment 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 Media Sentiment, you can compare the effects of market volatilities on Visa and Media Sentiment 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 Media Sentiment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Media Sentiment.
Diversification Opportunities for Visa and Media Sentiment
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Visa and Media is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Media Sentiment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Media Sentiment 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 Media Sentiment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Media Sentiment has no effect on the direction of Visa i.e., Visa and Media Sentiment go up and down completely randomly.
Pair Corralation between Visa and Media Sentiment
Taking into account the 90-day investment horizon Visa is expected to generate 5.48 times less return on investment than Media Sentiment. But when comparing it to its historical volatility, Visa Class A is 9.29 times less risky than Media Sentiment. It trades about 0.33 of its potential returns per unit of risk. Media Sentiment is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 6.62 in Media Sentiment on September 3, 2024 and sell it today you would earn a total of 2.88 from holding Media Sentiment or generate 43.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Visa Class A vs. Media Sentiment
Performance |
| Timeline |
| Visa Class A |
| Media Sentiment |
Visa and Media Sentiment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Media Sentiment
The main advantage of trading using opposite Visa and Media Sentiment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Media Sentiment 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 Media Sentiment will offset losses from the drop in Media Sentiment's long position.| Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart Holdings | Visa vs. Ally Financial |
| Media Sentiment vs. Meta Platforms | Media Sentiment vs. Alphabet Inc Class C | Media Sentiment vs. Twilio Inc | Media Sentiment vs. Snap Inc |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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