Correlation Between Visa and Innovator Hedged
Can any of the company-specific risk be diversified away by investing in both Visa and Innovator Hedged 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 Innovator Hedged 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 Innovator Hedged Nasdaq 100, you can compare the effects of market volatilities on Visa and Innovator Hedged 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 Innovator Hedged. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Innovator Hedged.
Diversification Opportunities for Visa and Innovator Hedged
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and Innovator is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Innovator Hedged Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Hedged Nasdaq 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 Innovator Hedged. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Hedged Nasdaq has no effect on the direction of Visa i.e., Visa and Innovator Hedged go up and down completely randomly.
Pair Corralation between Visa and Innovator Hedged
Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.43 times more return on investment than Innovator Hedged. However, Visa is 1.43 times more volatile than Innovator Hedged Nasdaq 100. It trades about 0.09 of its potential returns per unit of risk. Innovator Hedged Nasdaq 100 is currently generating about 0.11 per unit of risk. If you would invest 20,975 in Visa Class A on September 3, 2024 and sell it today you would earn a total of 10,690 from holding Visa Class A or generate 50.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 14.75% |
| Values | Daily Returns |
Visa Class A vs. Innovator Hedged Nasdaq 100
Performance |
| Timeline |
| Visa Class A |
| Innovator Hedged Nasdaq |
Visa and Innovator Hedged Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Innovator Hedged
The main advantage of trading using opposite Visa and Innovator Hedged positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Innovator Hedged 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 Innovator Hedged will offset losses from the drop in Innovator Hedged's long position.| Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart Holdings | Visa vs. Ally Financial |
| Innovator Hedged vs. Core Alternative ETF | Innovator Hedged vs. Aptus Drawdown Managed | Innovator Hedged vs. Amplify BlackSwan Growth | Innovator Hedged vs. Invesco SP 500 |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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