Correlation Between Visa and Equital
Can any of the company-specific risk be diversified away by investing in both Visa and Equital 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 Equital 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 Equital, you can compare the effects of market volatilities on Visa and Equital 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 Equital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Equital.
Diversification Opportunities for Visa and Equital
Modest diversification
The 3 months correlation between Visa and Equital is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Equital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equital 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 Equital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equital has no effect on the direction of Visa i.e., Visa and Equital go up and down completely randomly.
Pair Corralation between Visa and Equital
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.31 times more return on investment than Equital. However, Visa Class A is 3.24 times less risky than Equital. It trades about 0.11 of its potential returns per unit of risk. Equital is currently generating about 0.02 per unit of risk. If you would invest 22,095 in Visa Class A on January 19, 2024 and sell it today you would earn a total of 5,042 from holding Visa Class A or generate 22.82% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 81.5% |
Values | Daily Returns |
Visa Class A vs. Equital
Performance |
Timeline |
Visa Class A |
Equital |
Visa and Equital Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Visa and Equital
The main advantage of trading using opposite Visa and Equital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Equital 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 Equital will offset losses from the drop in Equital's long position.Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart HoldingsInc | Visa vs. Ally Financial |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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