Correlation Between Visa and Investment
Can any of the company-specific risk be diversified away by investing in both Visa and Investment 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 Investment 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 Investment Of America, you can compare the effects of market volatilities on Visa and Investment 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 Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Investment.
Diversification Opportunities for Visa and Investment
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and Investment is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Investment Of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Of America 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 Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Of America has no effect on the direction of Visa i.e., Visa and Investment go up and down completely randomly.
Pair Corralation between Visa and Investment
Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.61 times more return on investment than Investment. However, Visa is 1.61 times more volatile than Investment Of America. It trades about 0.33 of its potential returns per unit of risk. Investment Of America is currently generating about 0.15 per unit of risk. If you would invest 28,365 in Visa Class A on August 29, 2024 and sell it today you would earn a total of 2,817 from holding Visa Class A or generate 9.93% 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. Investment Of America
Performance |
| Timeline |
| Visa Class A |
| Investment Of America |
Visa and Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Investment
The main advantage of trading using opposite Visa and Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Investment 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 Investment will offset losses from the drop in Investment's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Investment vs. Calvert Short Duration | Investment vs. Franklin Federal Limited Term | Investment vs. Old Westbury Short Term | Investment vs. Rbc Short Duration |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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