Correlation Between Visa and Absolute Capital
Can any of the company-specific risk be diversified away by investing in both Visa and Absolute 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 Absolute 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 Absolute Capital Defender, you can compare the effects of market volatilities on Visa and Absolute 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 Absolute Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Absolute Capital.
Diversification Opportunities for Visa and Absolute Capital
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and Absolute is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Absolute Capital Defender in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Capital Defender 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 Absolute Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Capital Defender has no effect on the direction of Visa i.e., Visa and Absolute Capital go up and down completely randomly.
Pair Corralation between Visa and Absolute Capital
Taking into account the 90-day investment horizon Visa Class A is expected to under-perform the Absolute Capital. In addition to that, Visa is 2.06 times more volatile than Absolute Capital Defender. It trades about -0.41 of its total potential returns per unit of risk. Absolute Capital Defender is currently generating about -0.28 per unit of volatility. If you would invest 1,085 in Absolute Capital Defender on January 20, 2024 and sell it today you would lose (24.00) from holding Absolute Capital Defender or give up 2.21% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 95.45% |
Values | Daily Returns |
Visa Class A vs. Absolute Capital Defender
Performance |
Timeline |
Visa Class A |
Absolute Capital Defender |
Visa and Absolute Capital Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Visa and Absolute Capital
The main advantage of trading using opposite Visa and Absolute Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Absolute 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 Absolute Capital will offset losses from the drop in Absolute Capital'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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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