Correlation Between Visa and CVC Capital
Can any of the company-specific risk be diversified away by investing in both Visa and CVC 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 CVC 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 CVC Capital Partners, you can compare the effects of market volatilities on Visa and CVC 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 CVC Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and CVC Capital.
Diversification Opportunities for Visa and CVC Capital
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Visa and CVC is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and CVC Capital Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVC Capital Partners 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 CVC Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVC Capital Partners has no effect on the direction of Visa i.e., Visa and CVC Capital go up and down completely randomly.
Pair Corralation between Visa and CVC Capital
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.5 times more return on investment than CVC Capital. However, Visa Class A is 2.0 times less risky than CVC Capital. It trades about 0.08 of its potential returns per unit of risk. CVC Capital Partners is currently generating about -0.07 per unit of risk. If you would invest 32,037 in Visa Class A on December 25, 2024 and sell it today you would earn a total of 1,529 from holding Visa Class A or generate 4.77% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 96.72% |
Values | Daily Returns |
Visa Class A vs. CVC Capital Partners
Performance |
Timeline |
Visa Class A |
CVC Capital Partners |
Visa and CVC Capital Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Visa and CVC Capital
The main advantage of trading using opposite Visa and CVC Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, CVC 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 CVC Capital will offset losses from the drop in CVC Capital's long position.Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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