Correlation Between Visa and Option Care
Can any of the company-specific risk be diversified away by investing in both Visa and Option Care 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 Option Care 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 Option Care Health, you can compare the effects of market volatilities on Visa and Option Care 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 Option Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Option Care.
Diversification Opportunities for Visa and Option Care
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Visa and Option is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Option Care Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Option Care Health 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 Option Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Option Care Health has no effect on the direction of Visa i.e., Visa and Option Care go up and down completely randomly.
Pair Corralation between Visa and Option Care
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.42 times more return on investment than Option Care. However, Visa Class A is 2.37 times less risky than Option Care. It trades about 0.08 of its potential returns per unit of risk. Option Care Health is currently generating about 0.01 per unit of risk. If you would invest 27,727 in Visa Class A on November 3, 2024 and sell it today you would earn a total of 6,453 from holding Visa Class A or generate 23.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Visa Class A vs. Option Care Health
Performance |
| Timeline |
| Visa Class A |
| Option Care Health |
Visa and Option Care Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Option Care
The main advantage of trading using opposite Visa and Option Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Option Care 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 Option Care will offset losses from the drop in Option Care's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Option Care vs. Addus HomeCare | Option Care vs. Acadia Healthcare | Option Care vs. Encompass Health Corp | Option Care vs. Select Medical 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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