Correlation Between WEG SA and Visa
Can any of the company-specific risk be diversified away by investing in both WEG SA and Visa 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 WEG SA and Visa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WEG SA and Visa Inc, you can compare the effects of market volatilities on WEG SA and Visa 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 WEG SA with a short position of Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of WEG SA and Visa.
Diversification Opportunities for WEG SA and Visa
Average diversification
The 3 months correlation between WEG and Visa is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding WEG SA and Visa Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Inc and WEG SA 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 WEG SA are associated (or correlated) with Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Inc has no effect on the direction of WEG SA i.e., WEG SA and Visa go up and down completely randomly.
Pair Corralation between WEG SA and Visa
Assuming the 90 days trading horizon WEG SA is expected to generate 1.59 times less return on investment than Visa. But when comparing it to its historical volatility, WEG SA is 1.38 times less risky than Visa. It trades about 0.23 of its potential returns per unit of risk. Visa Inc is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 9,044 in Visa Inc on September 25, 2024 and sell it today you would earn a total of 1,018 from holding Visa Inc or generate 11.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
WEG SA vs. Visa Inc
Performance |
| Timeline |
| WEG SA |
| Visa Inc |
WEG SA and Visa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WEG SA and Visa
The main advantage of trading using opposite WEG SA and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WEG SA position performs unexpectedly, Visa 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 Visa will offset losses from the drop in Visa's long position.The idea behind WEG SA and Visa Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Visa vs. Mastercard Incorporated | Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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