Correlation Between Visa and SMU SA
Can any of the company-specific risk be diversified away by investing in both Visa and SMU SA 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 SMU SA 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 SMU SA, you can compare the effects of market volatilities on Visa and SMU SA 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 SMU SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and SMU SA.
Diversification Opportunities for Visa and SMU SA
Significant diversification
The 3 months correlation between Visa and SMU is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and SMU SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMU SA 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 SMU SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMU SA has no effect on the direction of Visa i.e., Visa and SMU SA go up and down completely randomly.
Pair Corralation between Visa and SMU SA
Taking into account the 90-day investment horizon Visa is expected to generate 1.22 times less return on investment than SMU SA. But when comparing it to its historical volatility, Visa Class A is 1.33 times less risky than SMU SA. It trades about 0.09 of its potential returns per unit of risk. SMU SA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 9,448 in SMU SA on August 30, 2024 and sell it today you would earn a total of 6,091 from holding SMU SA or generate 64.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.79% |
| Values | Daily Returns |
Visa Class A vs. SMU SA
Performance |
| Timeline |
| Visa Class A |
| SMU SA |
Visa and SMU SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and SMU SA
The main advantage of trading using opposite Visa and SMU SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, SMU SA 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 SMU SA will offset losses from the drop in SMU SA'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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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