Correlation Between Visa and XWC
Can any of the company-specific risk be diversified away by investing in both Visa and XWC 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 XWC 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 XWC, you can compare the effects of market volatilities on Visa and XWC 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 XWC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and XWC.
Diversification Opportunities for Visa and XWC
Almost no diversification
The 3 months correlation between Visa and XWC is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and XWC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XWC 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 XWC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XWC has no effect on the direction of Visa i.e., Visa and XWC go up and down completely randomly.
Pair Corralation between Visa and XWC
Taking into account the 90-day investment horizon Visa is expected to generate 9.07 times less return on investment than XWC. But when comparing it to its historical volatility, Visa Class A is 13.88 times less risky than XWC. It trades about 0.08 of its potential returns per unit of risk. XWC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3.02 in XWC on September 2, 2024 and sell it today you would earn a total of 0.36 from holding XWC or generate 11.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 60.48% |
| Values | Daily Returns |
Visa Class A vs. XWC
Performance |
| Timeline |
| Visa Class A |
| XWC |
Visa and XWC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and XWC
The main advantage of trading using opposite Visa and XWC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, XWC 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 XWC will offset losses from the drop in XWC's 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
Other Complementary Tools
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |