Correlation Between Visa and Otter Creek
Can any of the company-specific risk be diversified away by investing in both Visa and Otter Creek 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 Otter Creek 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 Otter Creek Longshort, you can compare the effects of market volatilities on Visa and Otter Creek 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 Otter Creek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Otter Creek.
Diversification Opportunities for Visa and Otter Creek
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Visa and Otter is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Otter Creek Longshort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otter Creek Longshort 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 Otter Creek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otter Creek Longshort has no effect on the direction of Visa i.e., Visa and Otter Creek go up and down completely randomly.
Pair Corralation between Visa and Otter Creek
Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.55 times more return on investment than Otter Creek. However, Visa is 1.55 times more volatile than Otter Creek Longshort. It trades about 0.41 of its potential returns per unit of risk. Otter Creek Longshort is currently generating about -0.05 per unit of risk. If you would invest 28,134 in Visa Class A on August 30, 2024 and sell it today you would earn a total of 3,336 from holding Visa Class A or generate 11.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Otter Creek Longshort
Performance |
| Timeline |
| Visa Class A |
| Otter Creek Longshort |
Visa and Otter Creek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Otter Creek
The main advantage of trading using opposite Visa and Otter Creek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Otter Creek 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 Otter Creek will offset losses from the drop in Otter Creek's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Otter Creek vs. HUMANA INC | Otter Creek vs. Aquagold International | Otter Creek vs. Barloworld Ltd ADR | Otter Creek vs. Morningstar Unconstrained Allocation |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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