Correlation Between Visa and Companhia
Can any of the company-specific risk be diversified away by investing in both Visa and Companhia 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 Companhia 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 Companhia de Saneamento, you can compare the effects of market volatilities on Visa and Companhia 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 Companhia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Companhia.
Diversification Opportunities for Visa and Companhia
Modest diversification
The 3 months correlation between Visa and Companhia is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Companhia de Saneamento in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia de Saneamento 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 Companhia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia de Saneamento has no effect on the direction of Visa i.e., Visa and Companhia go up and down completely randomly.
Pair Corralation between Visa and Companhia
Taking into account the 90-day investment horizon Visa is expected to generate 1.01 times less return on investment than Companhia. But when comparing it to its historical volatility, Visa Class A is 1.73 times less risky than Companhia. It trades about 0.07 of its potential returns per unit of risk. Companhia de Saneamento is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,432 in Companhia de Saneamento on August 29, 2024 and sell it today you would earn a total of 178.00 from holding Companhia de Saneamento or generate 12.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.05% |
| Values | Daily Returns |
Visa Class A vs. Companhia de Saneamento
Performance |
| Timeline |
| Visa Class A |
| Companhia de Saneamento |
Visa and Companhia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Companhia
The main advantage of trading using opposite Visa and Companhia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Companhia 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 Companhia will offset losses from the drop in Companhia's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Companhia vs. KINGBOARD CHEMICAL | Companhia vs. CHEMICAL INDUSTRIES | Companhia vs. ASURE SOFTWARE | Companhia vs. Sanyo Chemical Industries |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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