Correlation Between Visa and RBC Quant
Can any of the company-specific risk be diversified away by investing in both Visa and RBC Quant 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 RBC Quant 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 RBC Quant EAFE, you can compare the effects of market volatilities on Visa and RBC Quant 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 RBC Quant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and RBC Quant.
Diversification Opportunities for Visa and RBC Quant
Excellent diversification
The 3 months correlation between Visa and RBC is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and RBC Quant EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Quant EAFE 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 RBC Quant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Quant EAFE has no effect on the direction of Visa i.e., Visa and RBC Quant go up and down completely randomly.
Pair Corralation between Visa and RBC Quant
Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.7 times more return on investment than RBC Quant. However, Visa is 1.7 times more volatile than RBC Quant EAFE. It trades about 0.35 of its potential returns per unit of risk. RBC Quant EAFE is currently generating about -0.01 per unit of risk. If you would invest 28,929 in Visa Class A on September 1, 2024 and sell it today you would earn a total of 2,579 from holding Visa Class A or generate 8.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
Visa Class A vs. RBC Quant EAFE
Performance |
| Timeline |
| Visa Class A |
| RBC Quant EAFE |
Visa and RBC Quant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and RBC Quant
The main advantage of trading using opposite Visa and RBC Quant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, RBC Quant 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 RBC Quant will offset losses from the drop in RBC Quant's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| RBC Quant vs. Vanguard FTSE Emerging | RBC Quant vs. Vanguard FTSE Developed | RBC Quant vs. Vanguard Total Market | RBC Quant vs. Vanguard Canadian Aggregate |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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