Correlation Between Visa and United States
Can any of the company-specific risk be diversified away by investing in both Visa and United States 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 States 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 States Gasoline, you can compare the effects of market volatilities on Visa and United States 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 States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and United States.
Diversification Opportunities for Visa and United States
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Visa and United is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and United States Gasoline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Gasoline 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 States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Gasoline has no effect on the direction of Visa i.e., Visa and United States go up and down completely randomly.
Pair Corralation between Visa and United States
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.55 times more return on investment than United States. However, Visa Class A is 1.82 times less risky than United States. It trades about 0.08 of its potential returns per unit of risk. United States Gasoline is currently generating about 0.03 per unit of risk. If you would invest 21,038 in Visa Class A on August 24, 2024 and sell it today you would earn a total of 9,954 from holding Visa Class A or generate 47.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. United States Gasoline
Performance |
| Timeline |
| Visa Class A |
| United States Gasoline |
Visa and United States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and United States
The main advantage of trading using opposite Visa and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, United States 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 States will offset losses from the drop in United States' 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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