Correlation Between Visa and WisdomTree
Can any of the company-specific risk be diversified away by investing in both Visa and WisdomTree 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 WisdomTree 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 WisdomTree, you can compare the effects of market volatilities on Visa and WisdomTree 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 WisdomTree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and WisdomTree.
Diversification Opportunities for Visa and WisdomTree
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and WisdomTree is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and WisdomTree in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree 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 WisdomTree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree has no effect on the direction of Visa i.e., Visa and WisdomTree go up and down completely randomly.
Pair Corralation between Visa and WisdomTree
Taking into account the 90-day investment horizon Visa is expected to generate 1.4 times less return on investment than WisdomTree. But when comparing it to its historical volatility, Visa Class A is 1.78 times less risky than WisdomTree. It trades about 0.3 of its potential returns per unit of risk. WisdomTree is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 1,067 in WisdomTree on August 23, 2024 and sell it today you would earn a total of 133.00 from holding WisdomTree or generate 12.46% 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. WisdomTree
Performance |
| Timeline |
| Visa Class A |
| WisdomTree |
Visa and WisdomTree Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and WisdomTree
The main advantage of trading using opposite Visa and WisdomTree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, WisdomTree 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 WisdomTree will offset losses from the drop in WisdomTree's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| WisdomTree vs. Invesco Advantage MIT | WisdomTree vs. Invesco Municipal Trust | WisdomTree vs. Invesco California Value | WisdomTree vs. Victory Capital 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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