Correlation Between Visa and Western Asset
Can any of the company-specific risk be diversified away by investing in both Visa and Western Asset 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 Asset 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 Asset Premier, you can compare the effects of market volatilities on Visa and Western Asset 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 Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Western Asset.
Diversification Opportunities for Visa and Western Asset
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Visa and Western is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Western Asset Premier in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Premier 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 Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Premier has no effect on the direction of Visa i.e., Visa and Western Asset go up and down completely randomly.
Pair Corralation between Visa and Western Asset
Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.12 times more return on investment than Western Asset. However, Visa is 1.12 times more volatile than Western Asset Premier. It trades about 0.1 of its potential returns per unit of risk. Western Asset Premier is currently generating about 0.05 per unit of risk. If you would invest 22,097 in Visa Class A on September 1, 2024 and sell it today you would earn a total of 9,411 from holding Visa Class A or generate 42.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Western Asset Premier
Performance |
| Timeline |
| Visa Class A |
| Western Asset Premier |
Visa and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Western Asset
The main advantage of trading using opposite Visa and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Western Asset 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 Asset will offset losses from the drop in Western Asset's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Western Asset vs. MFS Investment Grade | Western Asset vs. Platinum Asia Investments | Western Asset vs. Pimco New York | Western Asset vs. Invesco Pennsylvania Value |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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