Correlation Between Visa and TESCO PLC
Can any of the company-specific risk be diversified away by investing in both Visa and TESCO PLC 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 TESCO PLC 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 TESCO PLC LS 0633333, you can compare the effects of market volatilities on Visa and TESCO PLC 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 TESCO PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and TESCO PLC.
Diversification Opportunities for Visa and TESCO PLC
Very good diversification
The 3 months correlation between Visa and TESCO is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and TESCO PLC LS 0633333 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TESCO PLC LS 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 TESCO PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TESCO PLC LS has no effect on the direction of Visa i.e., Visa and TESCO PLC go up and down completely randomly.
Pair Corralation between Visa and TESCO PLC
Taking into account the 90-day investment horizon Visa is expected to generate 1.02 times less return on investment than TESCO PLC. But when comparing it to its historical volatility, Visa Class A is 1.08 times less risky than TESCO PLC. It trades about 0.1 of its potential returns per unit of risk. TESCO PLC LS 0633333 is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 362.00 in TESCO PLC LS 0633333 on August 29, 2024 and sell it today you would earn a total of 60.00 from holding TESCO PLC LS 0633333 or generate 16.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
Visa Class A vs. TESCO PLC LS 0633333
Performance |
| Timeline |
| Visa Class A |
| TESCO PLC LS |
Visa and TESCO PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and TESCO PLC
The main advantage of trading using opposite Visa and TESCO PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, TESCO PLC 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 TESCO PLC will offset losses from the drop in TESCO PLC'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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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