Correlation Between Visa and Vanguard World
Can any of the company-specific risk be diversified away by investing in both Visa and Vanguard World 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 Vanguard World 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 Vanguard World, you can compare the effects of market volatilities on Visa and Vanguard World 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 Vanguard World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Vanguard World.
Diversification Opportunities for Visa and Vanguard World
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Visa and Vanguard is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Vanguard World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard World 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 Vanguard World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard World has no effect on the direction of Visa i.e., Visa and Vanguard World go up and down completely randomly.
Pair Corralation between Visa and Vanguard World
Taking into account the 90-day investment horizon Visa is expected to generate 1.05 times less return on investment than Vanguard World. But when comparing it to its historical volatility, Visa Class A is 1.13 times less risky than Vanguard World. It trades about 0.09 of its potential returns per unit of risk. Vanguard World is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 199,076 in Vanguard World on September 15, 2024 and sell it today you would earn a total of 55,449 from holding Vanguard World or generate 27.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.26% |
| Values | Daily Returns |
Visa Class A vs. Vanguard World
Performance |
| Timeline |
| Visa Class A |
| Vanguard World |
Visa and Vanguard World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Vanguard World
The main advantage of trading using opposite Visa and Vanguard World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Vanguard World 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 Vanguard World will offset losses from the drop in Vanguard World's long position.The idea behind Visa Class A and Vanguard World pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Vanguard World vs. Vanguard Funds Public | Vanguard World vs. Vanguard Specialized Funds | Vanguard World vs. Vanguard World | Vanguard World vs. Vanguard Index Funds |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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