Correlation Between Visa and UL Solutions
Can any of the company-specific risk be diversified away by investing in both Visa and UL Solutions 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 UL Solutions 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 UL Solutions, you can compare the effects of market volatilities on Visa and UL Solutions 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 UL Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and UL Solutions.
Diversification Opportunities for Visa and UL Solutions
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Visa and ULS is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and UL Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UL Solutions 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 UL Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UL Solutions has no effect on the direction of Visa i.e., Visa and UL Solutions go up and down completely randomly.
Pair Corralation between Visa and UL Solutions
Taking into account the 90-day investment horizon Visa is expected to generate 5.96 times less return on investment than UL Solutions. But when comparing it to its historical volatility, Visa Class A is 2.35 times less risky than UL Solutions. It trades about 0.07 of its potential returns per unit of risk. UL Solutions is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 2,791 in UL Solutions on September 1, 2024 and sell it today you would earn a total of 2,582 from holding UL Solutions or generate 92.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 86.17% |
| Values | Daily Returns |
Visa Class A vs. UL Solutions
Performance |
| Timeline |
| Visa Class A |
| UL Solutions |
Visa and UL Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and UL Solutions
The main advantage of trading using opposite Visa and UL Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, UL Solutions 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 UL Solutions will offset losses from the drop in UL Solutions' long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| UL Solutions vs. FormFactor | UL Solutions vs. Taiwan Semiconductor Manufacturing | UL Solutions vs. Arm Holdings plc | UL Solutions vs. Townsquare Media |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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