Correlation Between Visa and Textron
Can any of the company-specific risk be diversified away by investing in both Visa and Textron 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 Textron 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 Textron, you can compare the effects of market volatilities on Visa and Textron 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 Textron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Textron.
Diversification Opportunities for Visa and Textron
Weak diversification
The 3 months correlation between Visa and Textron is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Textron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Textron 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 Textron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Textron has no effect on the direction of Visa i.e., Visa and Textron go up and down completely randomly.
Pair Corralation between Visa and Textron
Taking into account the 90-day investment horizon Visa is expected to generate 1.2 times less return on investment than Textron. But when comparing it to its historical volatility, Visa Class A is 1.43 times less risky than Textron. It trades about 0.1 of its potential returns per unit of risk. Textron is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 109,462 in Textron on August 31, 2024 and sell it today you would earn a total of 56,073 from holding Textron or generate 51.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Textron
Performance |
| Timeline |
| Visa Class A |
| Textron |
Visa and Textron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Textron
The main advantage of trading using opposite Visa and Textron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Textron 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 Textron will offset losses from the drop in Textron's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Textron vs. KB Home | Textron vs. DXC Technology | Textron vs. Micron Technology | Textron vs. Cognizant Technology Solutions |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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