Correlation Between Visa and Teton Westwood
Can any of the company-specific risk be diversified away by investing in both Visa and Teton Westwood 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 Teton Westwood 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 Teton Westwood Small, you can compare the effects of market volatilities on Visa and Teton Westwood 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 Teton Westwood. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Teton Westwood.
Diversification Opportunities for Visa and Teton Westwood
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Visa and Teton is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Teton Westwood Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teton Westwood Small 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 Teton Westwood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teton Westwood Small has no effect on the direction of Visa i.e., Visa and Teton Westwood go up and down completely randomly.
Pair Corralation between Visa and Teton Westwood
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.61 times more return on investment than Teton Westwood. However, Visa Class A is 1.65 times less risky than Teton Westwood. It trades about 0.08 of its potential returns per unit of risk. Teton Westwood Small is currently generating about 0.0 per unit of risk. If you would invest 23,685 in Visa Class A on September 12, 2024 and sell it today you would earn a total of 7,553 from holding Visa Class A or generate 31.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.72% |
| Values | Daily Returns |
Visa Class A vs. Teton Westwood Small
Performance |
| Timeline |
| Visa Class A |
| Teton Westwood Small |
Visa and Teton Westwood Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Teton Westwood
The main advantage of trading using opposite Visa and Teton Westwood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Teton Westwood 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 Teton Westwood will offset losses from the drop in Teton Westwood's long position.The idea behind Visa Class A and Teton Westwood Small pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 CEOs Directory module to screen CEOs from public companies around the world.
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