Correlation Between Visa and Western Alliance
Can any of the company-specific risk be diversified away by investing in both Visa and Western Alliance 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 Western Alliance 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 Western Alliance Bancorporation, you can compare the effects of market volatilities on Visa and Western Alliance 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 Western Alliance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Western Alliance.
Diversification Opportunities for Visa and Western Alliance
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and Western is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Western Alliance Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Alliance Ban 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 Western Alliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Alliance Ban has no effect on the direction of Visa i.e., Visa and Western Alliance go up and down completely randomly.
Pair Corralation between Visa and Western Alliance
Taking into account the 90-day investment horizon Visa is expected to generate 4.52 times less return on investment than Western Alliance. But when comparing it to its historical volatility, Visa Class A is 3.0 times less risky than Western Alliance. It trades about 0.08 of its potential returns per unit of risk. Western Alliance Bancorporation is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,587 in Western Alliance Bancorporation on August 27, 2024 and sell it today you would earn a total of 6,778 from holding Western Alliance Bancorporation or generate 262.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Western Alliance Bancorp.
Performance |
| Timeline |
| Visa Class A |
| Western Alliance Ban |
Visa and Western Alliance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Western Alliance
The main advantage of trading using opposite Visa and Western Alliance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Western Alliance 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 Western Alliance will offset losses from the drop in Western Alliance's long position.| Visa vs. American Express | Visa vs. Morningstar Unconstrained Allocation | Visa vs. Sitka Gold Corp | Visa vs. MSCI ACWI exAUCONSUMER |
| Western Alliance vs. Zions Bancorporation | Western Alliance vs. KeyCorp | Western Alliance vs. First Horizon National | Western Alliance vs. Comerica |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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