Correlation Between Visa and UNITED BANK
Can any of the company-specific risk be diversified away by investing in both Visa and UNITED BANK 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 UNITED BANK 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 UNITED BANK FOR, you can compare the effects of market volatilities on Visa and UNITED BANK 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 UNITED BANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and UNITED BANK.
Diversification Opportunities for Visa and UNITED BANK
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and UNITED is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and UNITED BANK FOR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED BANK FOR 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 UNITED BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITED BANK FOR has no effect on the direction of Visa i.e., Visa and UNITED BANK go up and down completely randomly.
Pair Corralation between Visa and UNITED BANK
Taking into account the 90-day investment horizon Visa is expected to generate 2.45 times less return on investment than UNITED BANK. But when comparing it to its historical volatility, Visa Class A is 3.39 times less risky than UNITED BANK. It trades about 0.09 of its potential returns per unit of risk. UNITED BANK FOR is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,190 in UNITED BANK FOR on September 2, 2024 and sell it today you would earn a total of 1,080 from holding UNITED BANK FOR or generate 49.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.39% |
| Values | Daily Returns |
Visa Class A vs. UNITED BANK FOR
Performance |
| Timeline |
| Visa Class A |
| UNITED BANK FOR |
Visa and UNITED BANK Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and UNITED BANK
The main advantage of trading using opposite Visa and UNITED BANK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, UNITED BANK 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 UNITED BANK will offset losses from the drop in UNITED BANK'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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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