Correlation Between Visa and Value Capital
Can any of the company-specific risk be diversified away by investing in both Visa and Value Capital 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 Value Capital 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 Value Capital One, you can compare the effects of market volatilities on Visa and Value Capital 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 Value Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Value Capital.
Diversification Opportunities for Visa and Value Capital
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Visa and Value is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Value Capital One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Capital One 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 Value Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Capital One has no effect on the direction of Visa i.e., Visa and Value Capital go up and down completely randomly.
Pair Corralation between Visa and Value Capital
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.16 times more return on investment than Value Capital. However, Visa Class A is 6.16 times less risky than Value Capital. It trades about -0.17 of its potential returns per unit of risk. Value Capital One is currently generating about -0.16 per unit of risk. If you would invest 28,121 in Visa Class A on January 25, 2024 and sell it today you would lose (710.00) from holding Visa Class A or give up 2.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 77.27% |
| Values | Daily Returns |
Visa Class A vs. Value Capital One
Performance |
| Timeline |
| Visa Class A |
| Value Capital One |
Visa and Value Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Value Capital
The main advantage of trading using opposite Visa and Value Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Value Capital 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 Value Capital will offset losses from the drop in Value Capital's long position.The idea behind Visa Class A and Value Capital One 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.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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