Correlation Between Visa and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Visa and Dow Jones 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 Dow Jones 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 Dow Jones Hong, you can compare the effects of market volatilities on Visa and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Dow Jones.
Diversification Opportunities for Visa and Dow Jones
Very good diversification
The 3 months correlation between Visa and Dow is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Dow Jones Hong in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Hong 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Hong has no effect on the direction of Visa i.e., Visa and Dow Jones go up and down completely randomly.
Pair Corralation between Visa and Dow Jones
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.8 times more return on investment than Dow Jones. However, Visa Class A is 1.26 times less risky than Dow Jones. It trades about 0.09 of its potential returns per unit of risk. Dow Jones Hong is currently generating about 0.01 per unit of risk. If you would invest 25,387 in Visa Class A on September 2, 2024 and sell it today you would earn a total of 6,121 from holding Visa Class A or generate 24.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.25% |
| Values | Daily Returns |
Visa Class A vs. Dow Jones Hong
Performance |
| Timeline |
Visa and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Visa Class A
Pair trading matchups for Visa
Dow Jones Hong
Pair trading matchups for Dow Jones
Pair Trading with Visa and Dow Jones
The main advantage of trading using opposite Visa and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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