Correlation Between Visa and Trevena
Can any of the company-specific risk be diversified away by investing in both Visa and Trevena 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 Trevena 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 Trevena, you can compare the effects of market volatilities on Visa and Trevena 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 Trevena. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Trevena.
Diversification Opportunities for Visa and Trevena
Excellent diversification
The 3 months correlation between Visa and Trevena is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Trevena in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trevena 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 Trevena. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trevena has no effect on the direction of Visa i.e., Visa and Trevena go up and down completely randomly.
Pair Corralation between Visa and Trevena
Taking into account the 90-day investment horizon Visa is expected to generate 1.0 times less return on investment than Trevena. But when comparing it to its historical volatility, Visa Class A is 19.18 times less risky than Trevena. It trades about 0.08 of its potential returns per unit of risk. Trevena is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 4,675 in Trevena on September 2, 2024 and sell it today you would lose (4,477) from holding Trevena or give up 95.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 93.35% |
| Values | Daily Returns |
Visa Class A vs. Trevena
Performance |
| Timeline |
| Visa Class A |
| Trevena |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Visa and Trevena Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Trevena
The main advantage of trading using opposite Visa and Trevena positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Trevena 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 Trevena will offset losses from the drop in Trevena'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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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