Correlation Between Visa and Signature Bank
Can any of the company-specific risk be diversified away by investing in both Visa and Signature Bank 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 Signature Bank 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 Signature Bank, you can compare the effects of market volatilities on Visa and Signature Bank 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 Signature Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Signature Bank.
Diversification Opportunities for Visa and Signature Bank
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Visa and Signature is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Signature Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Signature Bank 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 Signature Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Signature Bank has no effect on the direction of Visa i.e., Visa and Signature Bank go up and down completely randomly.
Pair Corralation between Visa and Signature Bank
Taking into account the 90-day investment horizon Visa is expected to generate 1.55 times less return on investment than Signature Bank. But when comparing it to its historical volatility, Visa Class A is 15.76 times less risky than Signature Bank. It trades about 0.1 of its potential returns per unit of risk. Signature Bank is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 13.00 in Signature Bank on September 1, 2024 and sell it today you would lose (3.00) from holding Signature Bank or give up 23.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 8.33% |
| Values | Daily Returns |
Visa Class A vs. Signature Bank
Performance |
| Timeline |
| Visa Class A |
| Signature Bank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Visa and Signature Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Signature Bank
The main advantage of trading using opposite Visa and Signature Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Signature Bank 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 Signature Bank will offset losses from the drop in Signature Bank's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Signature Bank vs. Zions Bancorporation | Signature Bank vs. KeyCorp | Signature Bank vs. Comerica | Signature Bank vs. First Horizon National |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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