Correlation Between Visa and SSgA SPDR
Can any of the company-specific risk be diversified away by investing in both Visa and SSgA SPDR 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 SSgA SPDR 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 SSgA SPDR ETFs, you can compare the effects of market volatilities on Visa and SSgA SPDR 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 SSgA SPDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and SSgA SPDR.
Diversification Opportunities for Visa and SSgA SPDR
Very poor diversification
The 3 months correlation between Visa and SSgA is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and SSgA SPDR ETFs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSgA SPDR ETFs 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 SSgA SPDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSgA SPDR ETFs has no effect on the direction of Visa i.e., Visa and SSgA SPDR go up and down completely randomly.
Pair Corralation between Visa and SSgA SPDR
Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.61 times more return on investment than SSgA SPDR. However, Visa is 1.61 times more volatile than SSgA SPDR ETFs. It trades about 0.09 of its potential returns per unit of risk. SSgA SPDR ETFs is currently generating about 0.04 per unit of risk. If you would invest 20,975 in Visa Class A on September 3, 2024 and sell it today you would earn a total of 10,533 from holding Visa Class A or generate 50.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.21% |
| Values | Daily Returns |
Visa Class A vs. SSgA SPDR ETFs
Performance |
| Timeline |
| Visa Class A |
| SSgA SPDR ETFs |
Visa and SSgA SPDR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and SSgA SPDR
The main advantage of trading using opposite Visa and SSgA SPDR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, SSgA SPDR 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 SSgA SPDR will offset losses from the drop in SSgA SPDR's long position.| Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart Holdings | Visa vs. Ally Financial |
| SSgA SPDR vs. UBS Fund Solutions | SSgA SPDR vs. Xtrackers II | SSgA SPDR vs. Xtrackers Nikkei 225 | SSgA SPDR vs. iShares VII PLC |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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