Correlation Between Visa and Xencor
Can any of the company-specific risk be diversified away by investing in both Visa and Xencor 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 Xencor 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 Xencor Inc, you can compare the effects of market volatilities on Visa and Xencor 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 Xencor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Xencor.
Diversification Opportunities for Visa and Xencor
Very poor diversification
The 3 months correlation between Visa and Xencor is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Xencor Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xencor Inc 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 Xencor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xencor Inc has no effect on the direction of Visa i.e., Visa and Xencor go up and down completely randomly.
Pair Corralation between Visa and Xencor
Taking into account the 90-day investment horizon Visa is expected to generate 1.82 times less return on investment than Xencor. But when comparing it to its historical volatility, Visa Class A is 1.37 times less risky than Xencor. It trades about 0.33 of its potential returns per unit of risk. Xencor Inc is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest 2,116 in Xencor Inc on August 25, 2024 and sell it today you would earn a total of 385.00 from holding Xencor Inc or generate 18.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Xencor Inc
Performance |
| Timeline |
| Visa Class A |
| Xencor Inc |
Visa and Xencor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Xencor
The main advantage of trading using opposite Visa and Xencor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Xencor 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 Xencor will offset losses from the drop in Xencor's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Xencor vs. Edgewise Therapeutics | Xencor vs. Keros Therapeutics | Xencor vs. Monte Rosa Therapeutics | Xencor vs. Mineralys Therapeutics, Common |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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