Correlation Between Visa and US Global
Can any of the company-specific risk be diversified away by investing in both Visa and US Global 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 US Global 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 US Global Sea, you can compare the effects of market volatilities on Visa and US Global 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 US Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and US Global.
Diversification Opportunities for Visa and US Global
Very good diversification
The 3 months correlation between Visa and SEA is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and US Global Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Global Sea 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 US Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Global Sea has no effect on the direction of Visa i.e., Visa and US Global go up and down completely randomly.
Pair Corralation between Visa and US Global
Taking into account the 90-day investment horizon Visa Class A is expected to under-perform the US Global. But the stock apears to be less risky and, when comparing its historical volatility, Visa Class A is 1.36 times less risky than US Global. The stock trades about -0.15 of its potential returns per unit of risk. The US Global Sea is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,490 in US Global Sea on January 25, 2024 and sell it today you would earn a total of 47.00 from holding US Global Sea or generate 3.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. US Global Sea
Performance |
| Timeline |
| Visa Class A |
| US Global Sea |
Visa and US Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and US Global
The main advantage of trading using opposite Visa and US Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, US Global 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 US Global will offset losses from the drop in US Global's long position.The idea behind Visa Class A and US Global Sea 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.| US Global vs. Fidelity MSCI Materials | US Global vs. Fidelity MSCI Financials | US Global vs. Fidelity MSCI Consumer | US Global vs. Fidelity MSCI Consumer |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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