Correlation Between Visa and Stralem Equity
Can any of the company-specific risk be diversified away by investing in both Visa and Stralem Equity 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 Stralem Equity 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 Stralem Equity Fund, you can compare the effects of market volatilities on Visa and Stralem Equity 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 Stralem Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Stralem Equity.
Diversification Opportunities for Visa and Stralem Equity
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and Stralem is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Stralem Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stralem Equity 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 Stralem Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stralem Equity has no effect on the direction of Visa i.e., Visa and Stralem Equity go up and down completely randomly.
Pair Corralation between Visa and Stralem Equity
Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.49 times more return on investment than Stralem Equity. However, Visa is 1.49 times more volatile than Stralem Equity Fund. It trades about 0.41 of its potential returns per unit of risk. Stralem Equity Fund is currently generating about 0.3 per unit of risk. If you would invest 28,134 in Visa Class A on August 30, 2024 and sell it today you would earn a total of 3,336 from holding Visa Class A or generate 11.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Stralem Equity Fund
Performance |
| Timeline |
| Visa Class A |
| Stralem Equity |
Visa and Stralem Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Stralem Equity
The main advantage of trading using opposite Visa and Stralem Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Stralem Equity 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 Stralem Equity will offset losses from the drop in Stralem Equity's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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