Correlation Between Visa and Litman Gregory
Can any of the company-specific risk be diversified away by investing in both Visa and Litman Gregory 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 Litman Gregory 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 Litman Gregory Funds, you can compare the effects of market volatilities on Visa and Litman Gregory 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 Litman Gregory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Litman Gregory.
Diversification Opportunities for Visa and Litman Gregory
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Visa and Litman is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Litman Gregory Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litman Gregory Funds 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 Litman Gregory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litman Gregory Funds has no effect on the direction of Visa i.e., Visa and Litman Gregory go up and down completely randomly.
Pair Corralation between Visa and Litman Gregory
Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.44 times more return on investment than Litman Gregory. However, Visa is 1.44 times more volatile than Litman Gregory Funds. It trades about 0.34 of its potential returns per unit of risk. Litman Gregory Funds is currently generating about 0.34 per unit of risk. If you would invest 29,129 in Visa Class A on September 4, 2024 and sell it today you would earn a total of 2,536 from holding Visa Class A or generate 8.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Litman Gregory Funds
Performance |
| Timeline |
| Visa Class A |
| Litman Gregory Funds |
Visa and Litman Gregory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Litman Gregory
The main advantage of trading using opposite Visa and Litman Gregory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Litman Gregory 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 Litman Gregory will offset losses from the drop in Litman Gregory's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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