Correlation Between Visa and Principal Financial
Can any of the company-specific risk be diversified away by investing in both Visa and Principal Financial 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 Principal Financial 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 Principal Financial Group, you can compare the effects of market volatilities on Visa and Principal Financial 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 Principal Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Principal Financial.
Diversification Opportunities for Visa and Principal Financial
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Visa and Principal is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Principal Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Financial 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 Principal Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Financial has no effect on the direction of Visa i.e., Visa and Principal Financial go up and down completely randomly.
Pair Corralation between Visa and Principal Financial
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.91 times more return on investment than Principal Financial. However, Visa Class A is 1.09 times less risky than Principal Financial. It trades about 0.33 of its potential returns per unit of risk. Principal Financial Group is currently generating about 0.11 per unit of risk. If you would invest 28,365 in Visa Class A on August 27, 2024 and sell it today you would earn a total of 2,627 from holding Visa Class A or generate 9.26% 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. Principal Financial Group
Performance |
| Timeline |
| Visa Class A |
| Principal Financial |
Visa and Principal Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Principal Financial
The main advantage of trading using opposite Visa and Principal Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Principal Financial 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 Principal Financial will offset losses from the drop in Principal Financial's long position.| Visa vs. American Express | Visa vs. Morningstar Unconstrained Allocation | Visa vs. Sitka Gold Corp | Visa vs. MSCI ACWI exAUCONSUMER |
| Principal Financial vs. State Street Corp | Principal Financial vs. Bank of New | Principal Financial vs. SEI Investments | Principal Financial vs. Affiliated Managers Group |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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