Correlation Between Visa and Sol Gel
Can any of the company-specific risk be diversified away by investing in both Visa and Sol Gel 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 Sol Gel 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 Sol Gel Technologies, you can compare the effects of market volatilities on Visa and Sol Gel 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 Sol Gel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Sol Gel.
Diversification Opportunities for Visa and Sol Gel
Average diversification
The 3 months correlation between Visa and Sol is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Sol Gel Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sol Gel Technologies 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 Sol Gel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sol Gel Technologies has no effect on the direction of Visa i.e., Visa and Sol Gel go up and down completely randomly.
Pair Corralation between Visa and Sol Gel
Taking into account the 90-day investment horizon Visa Class A is expected to under-perform the Sol Gel. But the stock apears to be less risky and, when comparing its historical volatility, Visa Class A is 68.74 times less risky than Sol Gel. The stock trades about -0.12 of its potential returns per unit of risk. The Sol Gel Technologies is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 48.00 in Sol Gel Technologies on October 14, 2024 and sell it today you would earn a total of 57.00 from holding Sol Gel Technologies or generate 118.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Sol Gel Technologies
Performance |
| Timeline |
| Visa Class A |
| Sol Gel Technologies |
Visa and Sol Gel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Sol Gel
The main advantage of trading using opposite Visa and Sol Gel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Sol Gel 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 Sol Gel will offset losses from the drop in Sol Gel's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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