Correlation Between Visa and Nasdaq
Can any of the company-specific risk be diversified away by investing in both Visa and Nasdaq 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 Nasdaq 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 Nasdaq Inc, you can compare the effects of market volatilities on Visa and Nasdaq 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 Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Nasdaq.
Diversification Opportunities for Visa and Nasdaq
Almost no diversification
The 3 months correlation between Visa and Nasdaq is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Nasdaq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq Inc 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 Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq Inc has no effect on the direction of Visa i.e., Visa and Nasdaq go up and down completely randomly.
Pair Corralation between Visa and Nasdaq
Taking into account the 90-day investment horizon Visa is expected to generate 2.83 times less return on investment than Nasdaq. But when comparing it to its historical volatility, Visa Class A is 1.37 times less risky than Nasdaq. It trades about 0.09 of its potential returns per unit of risk. Nasdaq Inc is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 13,310 in Nasdaq Inc on September 2, 2024 and sell it today you would earn a total of 11,662 from holding Nasdaq Inc or generate 87.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.2% |
| Values | Daily Returns |
Visa Class A vs. Nasdaq Inc
Performance |
| Timeline |
| Visa Class A |
| Nasdaq Inc |
Visa and Nasdaq Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Nasdaq
The main advantage of trading using opposite Visa and Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Nasdaq 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 Nasdaq will offset losses from the drop in Nasdaq's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Nasdaq vs. Cognizant Technology Solutions | Nasdaq vs. CVS Health | Nasdaq vs. United Airlines Holdings | Nasdaq vs. G2D Investments |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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