Correlation Between Visa and Performance Food
Can any of the company-specific risk be diversified away by investing in both Visa and Performance Food 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 Performance Food 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 Performance Food Group, you can compare the effects of market volatilities on Visa and Performance Food 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 Performance Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Performance Food.
Diversification Opportunities for Visa and Performance Food
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and Performance is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Performance Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Performance Food 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 Performance Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Performance Food has no effect on the direction of Visa i.e., Visa and Performance Food go up and down completely randomly.
Pair Corralation between Visa and Performance Food
Taking into account the 90-day investment horizon Visa is expected to generate 1.37 times less return on investment than Performance Food. But when comparing it to its historical volatility, Visa Class A is 2.04 times less risky than Performance Food. It trades about 0.33 of its potential returns per unit of risk. Performance Food Group is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 7,400 in Performance Food Group on September 3, 2024 and sell it today you would earn a total of 850.00 from holding Performance Food Group or generate 11.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Visa Class A vs. Performance Food Group
Performance |
| Timeline |
| Visa Class A |
| Performance Food |
Visa and Performance Food Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Performance Food
The main advantage of trading using opposite Visa and Performance Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Performance Food 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 Performance Food will offset losses from the drop in Performance Food's long position.| Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart Holdings | Visa vs. Ally Financial |
| Performance Food vs. Australian Agricultural | Performance Food vs. Sumitomo Mitsui Construction | Performance Food vs. Iridium Communications | Performance Food vs. Entravision Communications |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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