Correlation Between Visa and Nationwide
Can any of the company-specific risk be diversified away by investing in both Visa and Nationwide 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 Nationwide 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 Nationwide, you can compare the effects of market volatilities on Visa and Nationwide 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 Nationwide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Nationwide.
Diversification Opportunities for Visa and Nationwide
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and Nationwide is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Nationwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide 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 Nationwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide has no effect on the direction of Visa i.e., Visa and Nationwide go up and down completely randomly.
Pair Corralation between Visa and Nationwide
Taking into account the 90-day investment horizon Visa is expected to generate 1.2 times less return on investment than Nationwide. In addition to that, Visa is 1.66 times more volatile than Nationwide. It trades about 0.1 of its total potential returns per unit of risk. Nationwide is currently generating about 0.19 per unit of volatility. If you would invest 2,009 in Nationwide on September 2, 2024 and sell it today you would earn a total of 68.00 from holding Nationwide or generate 3.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 7.8% |
| Values | Daily Returns |
Visa Class A vs. Nationwide
Performance |
| Timeline |
| Visa Class A |
| Nationwide |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Visa and Nationwide Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Nationwide
The main advantage of trading using opposite Visa and Nationwide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Nationwide 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 Nationwide will offset losses from the drop in Nationwide's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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