Correlation Between Visa and Trade Desk
Can any of the company-specific risk be diversified away by investing in both Visa and Trade Desk 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 Trade Desk 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 The Trade Desk, you can compare the effects of market volatilities on Visa and Trade Desk 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 Trade Desk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Trade Desk.
Diversification Opportunities for Visa and Trade Desk
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Visa and Trade is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and The Trade Desk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trade Desk 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 Trade Desk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trade Desk has no effect on the direction of Visa i.e., Visa and Trade Desk go up and down completely randomly.
Pair Corralation between Visa and Trade Desk
Taking into account the 90-day investment horizon Visa is expected to generate 3.02 times less return on investment than Trade Desk. But when comparing it to its historical volatility, Visa Class A is 2.35 times less risky than Trade Desk. It trades about 0.11 of its potential returns per unit of risk. The Trade Desk is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 490.00 in The Trade Desk on September 1, 2024 and sell it today you would earn a total of 284.00 from holding The Trade Desk or generate 57.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.44% |
| Values | Daily Returns |
Visa Class A vs. The Trade Desk
Performance |
| Timeline |
| Visa Class A |
| Trade Desk |
Visa and Trade Desk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Trade Desk
The main advantage of trading using opposite Visa and Trade Desk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Trade Desk 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 Trade Desk will offset losses from the drop in Trade Desk's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Trade Desk vs. Micron Technology | Trade Desk vs. Tyson Foods | Trade Desk vs. Cognizant Technology Solutions | Trade Desk vs. Zoom Video Communications |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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