Correlation Between Visa and Prospect Capital
Can any of the company-specific risk be diversified away by investing in both Visa and Prospect Capital 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 Prospect Capital 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 Prospect Capital, you can compare the effects of market volatilities on Visa and Prospect Capital 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 Prospect Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Prospect Capital.
Diversification Opportunities for Visa and Prospect Capital
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Visa and Prospect is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Prospect Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prospect Capital 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 Prospect Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prospect Capital has no effect on the direction of Visa i.e., Visa and Prospect Capital go up and down completely randomly.
Pair Corralation between Visa and Prospect Capital
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.33 times more return on investment than Prospect Capital. However, Visa Class A is 3.05 times less risky than Prospect Capital. It trades about 0.33 of its potential returns per unit of risk. Prospect Capital is currently generating about -0.08 per unit of risk. If you would invest 28,960 in Visa Class A on August 31, 2024 and sell it today you would earn a total of 2,510 from holding Visa Class A or generate 8.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Prospect Capital
Performance |
| Timeline |
| Visa Class A |
| Prospect Capital |
Visa and Prospect Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Prospect Capital
The main advantage of trading using opposite Visa and Prospect Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Prospect Capital 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 Prospect Capital will offset losses from the drop in Prospect Capital's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Prospect Capital vs. Ares Capital | Prospect Capital vs. Hercules Capital | Prospect Capital vs. Main Street Capital |
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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