Correlation Between Visa and Inverse Government
Can any of the company-specific risk be diversified away by investing in both Visa and Inverse Government 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 Inverse Government 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 Inverse Government Long, you can compare the effects of market volatilities on Visa and Inverse Government 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 Inverse Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Inverse Government.
Diversification Opportunities for Visa and Inverse Government
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Visa and Inverse is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Inverse Government Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Government Long 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 Inverse Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Government Long has no effect on the direction of Visa i.e., Visa and Inverse Government go up and down completely randomly.
Pair Corralation between Visa and Inverse Government
Taking into account the 90-day investment horizon Visa Class A is expected to under-perform the Inverse Government. But the stock apears to be less risky and, when comparing its historical volatility, Visa Class A is 1.36 times less risky than Inverse Government. The stock trades about -0.18 of its potential returns per unit of risk. The Inverse Government Long is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 19,489 in Inverse Government Long on January 25, 2024 and sell it today you would earn a total of 1,037 from holding Inverse Government Long or generate 5.32% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Visa Class A vs. Inverse Government Long
Performance |
Timeline |
Visa Class A |
Inverse Government Long |
Visa and Inverse Government Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Visa and Inverse Government
The main advantage of trading using opposite Visa and Inverse Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Inverse Government 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 Inverse Government will offset losses from the drop in Inverse Government's long position.Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart HoldingsInc | Visa vs. Ally Financial |
Inverse Government vs. Basic Materials Fund | Inverse Government vs. Basic Materials Fund | Inverse Government vs. Banking Fund Class | Inverse Government vs. Basic Materials Fund |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
Other Complementary Tools
Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
FinTech Suite Use AI to screen and filter profitable investment opportunities | |
Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
Fundamental Analysis View fundamental data based on most recent published financial statements | |
Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments |