Correlation Between Visa and Unum
Can any of the company-specific risk be diversified away by investing in both Visa and Unum 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 Unum 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 Unum Group, you can compare the effects of market volatilities on Visa and Unum 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 Unum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Unum.
Diversification Opportunities for Visa and Unum
Very poor diversification
The 3 months correlation between Visa and Unum is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Unum Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unum Group 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 Unum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unum Group has no effect on the direction of Visa i.e., Visa and Unum go up and down completely randomly.
Pair Corralation between Visa and Unum
Taking into account the 90-day investment horizon Visa is expected to generate 2.12 times less return on investment than Unum. But when comparing it to its historical volatility, Visa Class A is 1.65 times less risky than Unum. It trades about 0.37 of its potential returns per unit of risk. Unum Group is currently generating about 0.47 of returns per unit of risk over similar time horizon. If you would invest 6,185 in Unum Group on August 28, 2024 and sell it today you would earn a total of 1,436 from holding Unum Group or generate 23.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Unum Group
Performance |
| Timeline |
| Visa Class A |
| Unum Group |
Visa and Unum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Unum
The main advantage of trading using opposite Visa and Unum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Unum 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 Unum will offset losses from the drop in Unum's long position.| Visa vs. American Express | Visa vs. Morningstar Unconstrained Allocation | Visa vs. Sitka Gold Corp | Visa vs. MSCI ACWI exAUCONSUMER |
| Unum vs. Morningstar Unconstrained Allocation | Unum vs. Via Renewables | Unum vs. Sitka Gold Corp | Unum vs. MSCI ACWI exAUCONSUMER |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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