Correlation Between Visa and Microsoft Corp
Can any of the company-specific risk be diversified away by investing in both Visa and Microsoft Corp 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 Microsoft Corp 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 Microsoft Corp CDR, you can compare the effects of market volatilities on Visa and Microsoft Corp 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 Microsoft Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Microsoft Corp.
Diversification Opportunities for Visa and Microsoft Corp
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Visa and Microsoft is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Microsoft Corp CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft Corp CDR 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 Microsoft Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft Corp CDR has no effect on the direction of Visa i.e., Visa and Microsoft Corp go up and down completely randomly.
Pair Corralation between Visa and Microsoft Corp
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.79 times more return on investment than Microsoft Corp. However, Visa Class A is 1.27 times less risky than Microsoft Corp. It trades about 0.37 of its potential returns per unit of risk. Microsoft Corp CDR is currently generating about -0.04 per unit of risk. If you would invest 28,365 in Visa Class A on August 28, 2024 and sell it today you would earn a total of 2,954 from holding Visa Class A or generate 10.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Microsoft Corp CDR
Performance |
| Timeline |
| Visa Class A |
| Microsoft Corp CDR |
Visa and Microsoft Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Microsoft Corp
The main advantage of trading using opposite Visa and Microsoft Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Microsoft Corp 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 Microsoft Corp will offset losses from the drop in Microsoft Corp's long position.| Visa vs. American Express | Visa vs. Morningstar Unconstrained Allocation | Visa vs. Sitka Gold Corp | Visa vs. MSCI ACWI exAUCONSUMER |
| Microsoft Corp vs. Telus Corp | Microsoft Corp vs. Toronto Dominion Bank | Microsoft Corp vs. Manulife Financial Corp | Microsoft Corp vs. Canadian Natural Resources |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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