Correlation Between Visa and PVH Corp
Can any of the company-specific risk be diversified away by investing in both Visa and PVH Corp 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 PVH Corp 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 PVH Corp, you can compare the effects of market volatilities on Visa and PVH Corp 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 PVH Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and PVH Corp.
Diversification Opportunities for Visa and PVH Corp
Poor diversification
The 3 months correlation between Visa and PVH is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and PVH Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PVH Corp 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 PVH Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PVH Corp has no effect on the direction of Visa i.e., Visa and PVH Corp go up and down completely randomly.
Pair Corralation between Visa and PVH Corp
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.5 times more return on investment than PVH Corp. However, Visa Class A is 2.01 times less risky than PVH Corp. It trades about 0.29 of its potential returns per unit of risk. PVH Corp is currently generating about -0.34 per unit of risk. If you would invest 31,531 in Visa Class A on October 29, 2024 and sell it today you would earn a total of 1,489 from holding Visa Class A or generate 4.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. PVH Corp
Performance |
| Timeline |
| Visa Class A |
| PVH Corp |
Visa and PVH Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and PVH Corp
The main advantage of trading using opposite Visa and PVH Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, PVH Corp 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 PVH Corp will offset losses from the drop in PVH Corp'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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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