Correlation Between Visa and Netcapital
Can any of the company-specific risk be diversified away by investing in both Visa and Netcapital 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 Netcapital 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 Netcapital, you can compare the effects of market volatilities on Visa and Netcapital 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 Netcapital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Netcapital.
Diversification Opportunities for Visa and Netcapital
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Visa and Netcapital is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Netcapital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netcapital 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 Netcapital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netcapital has no effect on the direction of Visa i.e., Visa and Netcapital go up and down completely randomly.
Pair Corralation between Visa and Netcapital
Taking into account the 90-day investment horizon Visa is expected to generate 2.72 times less return on investment than Netcapital. But when comparing it to its historical volatility, Visa Class A is 4.73 times less risky than Netcapital. It trades about 0.35 of its potential returns per unit of risk. Netcapital is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 153.00 in Netcapital on September 1, 2024 and sell it today you would earn a total of 35.00 from holding Netcapital or generate 22.88% 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. Netcapital
Performance |
| Timeline |
| Visa Class A |
| Netcapital |
Visa and Netcapital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Netcapital
The main advantage of trading using opposite Visa and Netcapital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Netcapital 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 Netcapital will offset losses from the drop in Netcapital's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Netcapital vs. Visa Class A | Netcapital vs. Diamond Hill Investment | Netcapital vs. Distoken Acquisition | Netcapital vs. Associated Capital Group |
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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