Correlation Between Visa and UNITED UTILITIES
Can any of the company-specific risk be diversified away by investing in both Visa and UNITED UTILITIES 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 UTILITIES 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 UTILITIES GR, you can compare the effects of market volatilities on Visa and UNITED UTILITIES 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 UTILITIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and UNITED UTILITIES.
Diversification Opportunities for Visa and UNITED UTILITIES
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and UNITED is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and UNITED UTILITIES GR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED UTILITIES 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 UTILITIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITED UTILITIES has no effect on the direction of Visa i.e., Visa and UNITED UTILITIES go up and down completely randomly.
Pair Corralation between Visa and UNITED UTILITIES
Taking into account the 90-day investment horizon Visa is expected to generate 1.24 times less return on investment than UNITED UTILITIES. But when comparing it to its historical volatility, Visa Class A is 1.18 times less risky than UNITED UTILITIES. It trades about 0.34 of its potential returns per unit of risk. UNITED UTILITIES GR is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 1,204 in UNITED UTILITIES GR on September 2, 2024 and sell it today you would earn a total of 136.00 from holding UNITED UTILITIES GR or generate 11.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Visa Class A vs. UNITED UTILITIES GR
Performance |
| Timeline |
| Visa Class A |
| UNITED UTILITIES |
Visa and UNITED UTILITIES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and UNITED UTILITIES
The main advantage of trading using opposite Visa and UNITED UTILITIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, UNITED UTILITIES 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 UTILITIES will offset losses from the drop in UNITED UTILITIES's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| UNITED UTILITIES vs. SIVERS SEMICONDUCTORS AB | UNITED UTILITIES vs. Darden Restaurants | UNITED UTILITIES vs. Reliance Steel Aluminum | UNITED UTILITIES vs. Q2M Managementberatung AG |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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