Correlation Between Visa and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Visa and SPDR SP 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 SPDR SP 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 SPDR SP Transportation, you can compare the effects of market volatilities on Visa and SPDR SP 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 SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and SPDR SP.
Diversification Opportunities for Visa and SPDR SP
Very poor diversification
The 3 months correlation between Visa and SPDR is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and SPDR SP Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Transportation 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Transportation has no effect on the direction of Visa i.e., Visa and SPDR SP go up and down completely randomly.
Pair Corralation between Visa and SPDR SP
Taking into account the 90-day investment horizon Visa is expected to generate 1.22 times less return on investment than SPDR SP. But when comparing it to its historical volatility, Visa Class A is 1.24 times less risky than SPDR SP. It trades about 0.05 of its potential returns per unit of risk. SPDR SP Transportation is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 8,224 in SPDR SP Transportation on August 27, 2024 and sell it today you would earn a total of 1,013 from holding SPDR SP Transportation or generate 12.32% 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. SPDR SP Transportation
Performance |
| Timeline |
| Visa Class A |
| SPDR SP Transportation |
Visa and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and SPDR SP
The main advantage of trading using opposite Visa and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, SPDR SP 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 SPDR SP will offset losses from the drop in SPDR SP's long position.| Visa vs. American Express | Visa vs. Morningstar Unconstrained Allocation | Visa vs. Sitka Gold Corp | Visa vs. MSCI ACWI exAUCONSUMER |
| SPDR SP vs. First Trust Exchange Traded | SPDR SP vs. Ultimus Managers Trust | SPDR SP vs. Horizon Kinetics Medical | SPDR SP vs. Harbor Health Care |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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