Correlation Between Visa and Pear Tree
Can any of the company-specific risk be diversified away by investing in both Visa and Pear Tree 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 Pear Tree 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 Pear Tree Polaris, you can compare the effects of market volatilities on Visa and Pear Tree 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 Pear Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Pear Tree.
Diversification Opportunities for Visa and Pear Tree
Poor diversification
The 3 months correlation between Visa and Pear is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Pear Tree Polaris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pear Tree Polaris 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 Pear Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pear Tree Polaris has no effect on the direction of Visa i.e., Visa and Pear Tree go up and down completely randomly.
Pair Corralation between Visa and Pear Tree
Taking into account the 90-day investment horizon Visa Class A is expected to under-perform the Pear Tree. In addition to that, Visa is 2.66 times more volatile than Pear Tree Polaris. It trades about -0.19 of its total potential returns per unit of risk. Pear Tree Polaris is currently generating about -0.17 per unit of volatility. If you would invest 1,226 in Pear Tree Polaris on January 5, 2025 and sell it today you would lose (36.00) from holding Pear Tree Polaris or give up 2.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Pear Tree Polaris
Performance |
| Timeline |
| Visa Class A |
| Pear Tree Polaris |
Visa and Pear Tree Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Pear Tree
The main advantage of trading using opposite Visa and Pear Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Pear Tree 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 Pear Tree will offset losses from the drop in Pear Tree's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Pear Tree vs. Limited Term Tax | Pear Tree vs. Us Government Securities | Pear Tree vs. Oklahoma Municipal Fund | Pear Tree vs. The Hartford Municipal |
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 CEOs Directory module to screen CEOs from public companies around the world.
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