Correlation Between Visa and Skyward Specialty
Can any of the company-specific risk be diversified away by investing in both Visa and Skyward Specialty 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 Skyward Specialty 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 Skyward Specialty Insurance, you can compare the effects of market volatilities on Visa and Skyward Specialty 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 Skyward Specialty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Skyward Specialty.
Diversification Opportunities for Visa and Skyward Specialty
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Visa and Skyward is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Skyward Specialty Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skyward Specialty 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 Skyward Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skyward Specialty has no effect on the direction of Visa i.e., Visa and Skyward Specialty go up and down completely randomly.
Pair Corralation between Visa and Skyward Specialty
Taking into account the 90-day investment horizon Visa is expected to generate 1.42 times less return on investment than Skyward Specialty. But when comparing it to its historical volatility, Visa Class A is 1.45 times less risky than Skyward Specialty. It trades about 0.36 of its potential returns per unit of risk. Skyward Specialty Insurance is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 4,584 in Skyward Specialty Insurance on August 28, 2024 and sell it today you would earn a total of 683.00 from holding Skyward Specialty Insurance or generate 14.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Skyward Specialty Insurance
Performance |
| Timeline |
| Visa Class A |
| Skyward Specialty |
Visa and Skyward Specialty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Skyward Specialty
The main advantage of trading using opposite Visa and Skyward Specialty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Skyward Specialty 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 Skyward Specialty will offset losses from the drop in Skyward Specialty's long position.| Visa vs. American Express | Visa vs. Morningstar Unconstrained Allocation | Visa vs. Sitka Gold Corp | Visa vs. MSCI ACWI exAUCONSUMER |
| Skyward Specialty vs. Horace Mann Educators | Skyward Specialty vs. Kemper | Skyward Specialty vs. RLI Corp | Skyward Specialty vs. Global Indemnity PLC |
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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