Correlation Between Visa and Invesco Aerospace
Can any of the company-specific risk be diversified away by investing in both Visa and Invesco Aerospace 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 Invesco Aerospace 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 Invesco Aerospace Defense, you can compare the effects of market volatilities on Visa and Invesco Aerospace 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 Invesco Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Invesco Aerospace.
Diversification Opportunities for Visa and Invesco Aerospace
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Visa and Invesco is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Invesco Aerospace Defense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Aerospace Defense 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 Invesco Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Aerospace Defense has no effect on the direction of Visa i.e., Visa and Invesco Aerospace go up and down completely randomly.
Pair Corralation between Visa and Invesco Aerospace
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.86 times more return on investment than Invesco Aerospace. However, Visa Class A is 1.16 times less risky than Invesco Aerospace. It trades about 0.44 of its potential returns per unit of risk. Invesco Aerospace Defense is currently generating about 0.25 per unit of risk. If you would invest 31,440 in Visa Class A on November 3, 2024 and sell it today you would earn a total of 2,740 from holding Visa Class A or generate 8.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Invesco Aerospace Defense
Performance |
| Timeline |
| Visa Class A |
| Invesco Aerospace Defense |
Visa and Invesco Aerospace Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Invesco Aerospace
The main advantage of trading using opposite Visa and Invesco Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Invesco Aerospace 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 Invesco Aerospace will offset losses from the drop in Invesco Aerospace'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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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