Correlation Between Visa and Invesco NASDAQ
Can any of the company-specific risk be diversified away by investing in both Visa and Invesco NASDAQ 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 NASDAQ 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 NASDAQ 100, you can compare the effects of market volatilities on Visa and Invesco NASDAQ 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 NASDAQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Invesco NASDAQ.
Diversification Opportunities for Visa and Invesco NASDAQ
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Visa and Invesco is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Invesco NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco NASDAQ 100 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 NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco NASDAQ 100 has no effect on the direction of Visa i.e., Visa and Invesco NASDAQ go up and down completely randomly.
Pair Corralation between Visa and Invesco NASDAQ
Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.32 times more return on investment than Invesco NASDAQ. However, Visa is 1.32 times more volatile than Invesco NASDAQ 100. It trades about 0.1 of its potential returns per unit of risk. Invesco NASDAQ 100 is currently generating about 0.1 per unit of risk. If you would invest 27,135 in Visa Class A on September 2, 2024 and sell it today you would earn a total of 4,373 from holding Visa Class A or generate 16.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Invesco NASDAQ 100
Performance |
| Timeline |
| Visa Class A |
| Invesco NASDAQ 100 |
Visa and Invesco NASDAQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Invesco NASDAQ
The main advantage of trading using opposite Visa and Invesco NASDAQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Invesco NASDAQ 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 NASDAQ will offset losses from the drop in Invesco NASDAQ's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Invesco NASDAQ vs. BMO SP 500 | Invesco NASDAQ vs. Vanguard SP 500 | Invesco NASDAQ vs. BMO SP 500 | Invesco NASDAQ vs. BMO NASDAQ 100 |
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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