Correlation Between Visa and Large Cap
Can any of the company-specific risk be diversified away by investing in both Visa and Large Cap 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 Large Cap 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 Large Cap Value, you can compare the effects of market volatilities on Visa and Large Cap 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 Large Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Large Cap.
Diversification Opportunities for Visa and Large Cap
Very weak diversification
The 3 months correlation between Visa and Large is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Large Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Value 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 Large Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap Value has no effect on the direction of Visa i.e., Visa and Large Cap go up and down completely randomly.
Pair Corralation between Visa and Large Cap
Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.3 times more return on investment than Large Cap. However, Visa is 1.3 times more volatile than Large Cap Value. It trades about 0.09 of its potential returns per unit of risk. Large Cap Value is currently generating about 0.06 per unit of risk. If you would invest 26,992 in Visa Class A on August 25, 2024 and sell it today you would earn a total of 4,000 from holding Visa Class A or generate 14.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Large Cap Value
Performance |
| Timeline |
| Visa Class A |
| Large Cap Value |
Visa and Large Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Large Cap
The main advantage of trading using opposite Visa and Large Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Large Cap 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 Large Cap will offset losses from the drop in Large Cap's long position.| Visa vs. American Express | Visa vs. Morningstar Unconstrained Allocation | Visa vs. Sitka Gold Corp | Visa vs. MSCI ACWI exAUCONSUMER |
| Large Cap vs. Lord Abbett High | Large Cap vs. Pioneer High Yield | Large Cap vs. Guggenheim High Yield | Large Cap vs. Msift High Yield |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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