Correlation Between Visa and Metropolitan West
Can any of the company-specific risk be diversified away by investing in both Visa and Metropolitan West 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 Metropolitan West 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 Metropolitan West Total, you can compare the effects of market volatilities on Visa and Metropolitan West 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 Metropolitan West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Metropolitan West.
Diversification Opportunities for Visa and Metropolitan West
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Visa and Metropolitan is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Metropolitan West Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan West Total 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 Metropolitan West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan West Total has no effect on the direction of Visa i.e., Visa and Metropolitan West go up and down completely randomly.
Pair Corralation between Visa and Metropolitan West
Taking into account the 90-day investment horizon Visa Class A is expected to generate 3.13 times more return on investment than Metropolitan West. However, Visa is 3.13 times more volatile than Metropolitan West Total. It trades about 0.28 of its potential returns per unit of risk. Metropolitan West Total is currently generating about -0.12 per unit of risk. If you would invest 27,633 in Visa Class A on September 3, 2024 and sell it today you would earn a total of 3,875 from holding Visa Class A or generate 14.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Metropolitan West Total
Performance |
| Timeline |
| Visa Class A |
| Metropolitan West Total |
Visa and Metropolitan West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Metropolitan West
The main advantage of trading using opposite Visa and Metropolitan West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Metropolitan West 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 Metropolitan West will offset losses from the drop in Metropolitan West's long position.| Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart Holdings | Visa vs. Ally Financial |
| Metropolitan West vs. International Investors Gold | Metropolitan West vs. Global Gold Fund | Metropolitan West vs. Vy Goldman Sachs | Metropolitan West vs. Gabelli Gold Fund |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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