Correlation Between Visa and New Economy
Can any of the company-specific risk be diversified away by investing in both Visa and New Economy 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 New Economy 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 New Economy Fund, you can compare the effects of market volatilities on Visa and New Economy 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 New Economy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and New Economy.
Diversification Opportunities for Visa and New Economy
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Visa and New is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and New Economy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Economy Fund 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 New Economy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Economy Fund has no effect on the direction of Visa i.e., Visa and New Economy go up and down completely randomly.
Pair Corralation between Visa and New Economy
Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.35 times more return on investment than New Economy. However, Visa is 1.35 times more volatile than New Economy Fund. It trades about 0.37 of its potential returns per unit of risk. New Economy Fund is currently generating about 0.05 per unit of risk. If you would invest 28,365 in Visa Class A on August 28, 2024 and sell it today you would earn a total of 2,954 from holding Visa Class A or generate 10.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. New Economy Fund
Performance |
| Timeline |
| Visa Class A |
| New Economy Fund |
Visa and New Economy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and New Economy
The main advantage of trading using opposite Visa and New Economy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, New Economy 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 New Economy will offset losses from the drop in New Economy's long position.| Visa vs. American Express | Visa vs. Morningstar Unconstrained Allocation | Visa vs. Sitka Gold Corp | Visa vs. MSCI ACWI exAUCONSUMER |
| New Economy vs. Versatile Bond Portfolio | New Economy vs. T Rowe Price | New Economy vs. Alliancebernstein National Municipal | New Economy vs. Nuveen All American 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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