Correlation Between Visa and American Beacon
Can any of the company-specific risk be diversified away by investing in both Visa and American Beacon 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 American Beacon 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 American Beacon Stephens, you can compare the effects of market volatilities on Visa and American Beacon 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 American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and American Beacon.
Diversification Opportunities for Visa and American Beacon
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Visa and American is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and American Beacon Stephens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Stephens 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 American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Stephens has no effect on the direction of Visa i.e., Visa and American Beacon go up and down completely randomly.
Pair Corralation between Visa and American Beacon
Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.34 times more return on investment than American Beacon. However, Visa is 1.34 times more volatile than American Beacon Stephens. It trades about 0.11 of its potential returns per unit of risk. American Beacon Stephens is currently generating about 0.13 per unit of risk. If you would invest 26,932 in Visa Class A on September 1, 2024 and sell it today you would earn a total of 4,576 from holding Visa Class A or generate 16.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Visa Class A vs. American Beacon Stephens
Performance |
| Timeline |
| Visa Class A |
| American Beacon Stephens |
Visa and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and American Beacon
The main advantage of trading using opposite Visa and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, American Beacon 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 American Beacon will offset losses from the drop in American Beacon's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| American Beacon vs. Davis Financial Fund | American Beacon vs. Mesirow Financial Small | American Beacon vs. Gabelli Global Financial | American Beacon vs. Prudential Jennison Financial |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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