Correlation Between Visa and Wayfair
Can any of the company-specific risk be diversified away by investing in both Visa and Wayfair 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 Wayfair 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 Wayfair, you can compare the effects of market volatilities on Visa and Wayfair 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 Wayfair. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Wayfair.
Diversification Opportunities for Visa and Wayfair
Very good diversification
The 3 months correlation between Visa and Wayfair is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Wayfair in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wayfair 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 Wayfair. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wayfair has no effect on the direction of Visa i.e., Visa and Wayfair go up and down completely randomly.
Pair Corralation between Visa and Wayfair
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.36 times more return on investment than Wayfair. However, Visa Class A is 2.77 times less risky than Wayfair. It trades about 0.3 of its potential returns per unit of risk. Wayfair is currently generating about -0.12 per unit of risk. If you would invest 28,424 in Visa Class A on August 23, 2024 and sell it today you would earn a total of 2,566 from holding Visa Class A or generate 9.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Wayfair
Performance |
| Timeline |
| Visa Class A |
| Wayfair |
Visa and Wayfair Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Wayfair
The main advantage of trading using opposite Visa and Wayfair positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Wayfair 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 Wayfair will offset losses from the drop in Wayfair's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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