Correlation Between Visa and IShares Small
Can any of the company-specific risk be diversified away by investing in both Visa and IShares Small 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 IShares Small 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 iShares Small Cap, you can compare the effects of market volatilities on Visa and IShares Small 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 IShares Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and IShares Small.
Diversification Opportunities for Visa and IShares Small
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Visa and IShares is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and iShares Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Small Cap 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 IShares Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Small Cap has no effect on the direction of Visa i.e., Visa and IShares Small go up and down completely randomly.
Pair Corralation between Visa and IShares Small
Taking into account the 90-day investment horizon Visa is expected to generate 1.09 times less return on investment than IShares Small. But when comparing it to its historical volatility, Visa Class A is 1.13 times less risky than IShares Small. It trades about 0.11 of its potential returns per unit of risk. iShares Small Cap is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 3,966 in iShares Small Cap on September 1, 2024 and sell it today you would earn a total of 736.00 from holding iShares Small Cap or generate 18.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Visa Class A vs. iShares Small Cap
Performance |
| Timeline |
| Visa Class A |
| iShares Small Cap |
Visa and IShares Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and IShares Small
The main advantage of trading using opposite Visa and IShares Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, IShares Small 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 IShares Small will offset losses from the drop in IShares Small's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| IShares Small vs. iShares SPTSX Small | IShares Small vs. iShares Canadian Value | IShares Small vs. iShares Canadian Growth | IShares Small vs. iShares SPTSX Completion |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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