Correlation Between Visa and White Mountains
Can any of the company-specific risk be diversified away by investing in both Visa and White Mountains 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 White Mountains 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 White Mountains Insurance, you can compare the effects of market volatilities on Visa and White Mountains 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 White Mountains. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and White Mountains.
Diversification Opportunities for Visa and White Mountains
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Visa and White is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and White Mountains Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on White Mountains Insurance 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 White Mountains. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of White Mountains Insurance has no effect on the direction of Visa i.e., Visa and White Mountains go up and down completely randomly.
Pair Corralation between Visa and White Mountains
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.74 times more return on investment than White Mountains. However, Visa Class A is 1.35 times less risky than White Mountains. It trades about 0.1 of its potential returns per unit of risk. White Mountains Insurance is currently generating about 0.07 per unit of risk. If you would invest 26,322 in Visa Class A on November 9, 2024 and sell it today you would earn a total of 8,426 from holding Visa Class A or generate 32.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. White Mountains Insurance
Performance |
| Timeline |
| Visa Class A |
| White Mountains Insurance |
Visa and White Mountains Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and White Mountains
The main advantage of trading using opposite Visa and White Mountains positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, White Mountains 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 White Mountains will offset losses from the drop in White Mountains' long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| White Mountains vs. NI Holdings | White Mountains vs. Donegal Group A | White Mountains vs. Donegal Group B | White Mountains vs. The Hanover Insurance |
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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