Correlation Between Visa and Northern Stock
Can any of the company-specific risk be diversified away by investing in both Visa and Northern Stock 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 Northern Stock 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 Northern Stock Index, you can compare the effects of market volatilities on Visa and Northern Stock 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 Northern Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Northern Stock.
Diversification Opportunities for Visa and Northern Stock
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Visa and Northern is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Northern Stock Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Stock Index 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 Northern Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Stock Index has no effect on the direction of Visa i.e., Visa and Northern Stock go up and down completely randomly.
Pair Corralation between Visa and Northern Stock
Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.26 times more return on investment than Northern Stock. However, Visa is 1.26 times more volatile than Northern Stock Index. It trades about 0.09 of its potential returns per unit of risk. Northern Stock Index is currently generating about 0.1 per unit of risk. If you would invest 22,413 in Visa Class A on November 1, 2024 and sell it today you would earn a total of 11,851 from holding Visa Class A or generate 52.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Northern Stock Index
Performance |
| Timeline |
| Visa Class A |
| Northern Stock Index |
Visa and Northern Stock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Northern Stock
The main advantage of trading using opposite Visa and Northern Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Northern Stock 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 Northern Stock will offset losses from the drop in Northern Stock's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Northern Stock vs. Northern Small Cap | Northern Stock vs. Northern International Equity | Northern Stock vs. Northern Mid Cap | Northern Stock vs. Northern Bond Index |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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