Correlation Between Visa and Airports
Can any of the company-specific risk be diversified away by investing in both Visa and Airports 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 Airports 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 Airports of Thailand, you can compare the effects of market volatilities on Visa and Airports 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 Airports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Airports.
Diversification Opportunities for Visa and Airports
Average diversification
The 3 months correlation between Visa and Airports is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Airports of Thailand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airports of Thailand 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 Airports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airports of Thailand has no effect on the direction of Visa i.e., Visa and Airports go up and down completely randomly.
Pair Corralation between Visa and Airports
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.3 times more return on investment than Airports. However, Visa Class A is 3.35 times less risky than Airports. It trades about 0.32 of its potential returns per unit of risk. Airports of Thailand is currently generating about -0.35 per unit of risk. If you would invest 32,965 in Visa Class A on November 25, 2024 and sell it today you would earn a total of 1,888 from holding Visa Class A or generate 5.73% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 95.45% |
Values | Daily Returns |
Visa Class A vs. Airports of Thailand
Performance |
Timeline |
Visa Class A |
Airports of Thailand |
Visa and Airports Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Visa and Airports
The main advantage of trading using opposite Visa and Airports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Airports 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 Airports will offset losses from the drop in Airports' long position.Visa vs. American Express | ||
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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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