Correlation Between Visa and Municipal Bond
Can any of the company-specific risk be diversified away by investing in both Visa and Municipal Bond 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 Municipal Bond 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 Municipal Bond Portfolio, you can compare the effects of market volatilities on Visa and Municipal Bond 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 Municipal Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Municipal Bond.
Diversification Opportunities for Visa and Municipal Bond
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Visa and Municipal is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Municipal Bond Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Municipal Bond Portfolio 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 Municipal Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Municipal Bond Portfolio has no effect on the direction of Visa i.e., Visa and Municipal Bond go up and down completely randomly.
Pair Corralation between Visa and Municipal Bond
Taking into account the 90-day investment horizon Visa Class A is expected to generate 6.69 times more return on investment than Municipal Bond. However, Visa is 6.69 times more volatile than Municipal Bond Portfolio. It trades about 0.1 of its potential returns per unit of risk. Municipal Bond Portfolio is currently generating about 0.11 per unit of risk. If you would invest 24,113 in Visa Class A on September 1, 2024 and sell it today you would earn a total of 7,395 from holding Visa Class A or generate 30.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.63% |
| Values | Daily Returns |
Visa Class A vs. Municipal Bond Portfolio
Performance |
| Timeline |
| Visa Class A |
| Municipal Bond Portfolio |
Visa and Municipal Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Municipal Bond
The main advantage of trading using opposite Visa and Municipal Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Municipal Bond 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 Municipal Bond will offset losses from the drop in Municipal Bond's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Municipal Bond vs. Artisan High Income | Municipal Bond vs. T Rowe Price | Municipal Bond vs. Lgm Risk Managed | Municipal Bond vs. Legg Mason Partners |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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