Correlation Between Visa and RBC Target
Can any of the company-specific risk be diversified away by investing in both Visa and RBC Target 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 RBC Target 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 RBC Target 2027, you can compare the effects of market volatilities on Visa and RBC Target 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 RBC Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and RBC Target.
Diversification Opportunities for Visa and RBC Target
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Visa and RBC is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and RBC Target 2027 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Target 2027 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 RBC Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Target 2027 has no effect on the direction of Visa i.e., Visa and RBC Target go up and down completely randomly.
Pair Corralation between Visa and RBC Target
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.66 times more return on investment than RBC Target. However, Visa Class A is 1.52 times less risky than RBC Target. It trades about 0.11 of its potential returns per unit of risk. RBC Target 2027 is currently generating about 0.06 per unit of risk. If you would invest 21,535 in Visa Class A on December 3, 2024 and sell it today you would earn a total of 14,736 from holding Visa Class A or generate 68.43% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 97.78% |
Values | Daily Returns |
Visa Class A vs. RBC Target 2027
Performance |
Timeline |
Visa Class A |
RBC Target 2027 |
Visa and RBC Target Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Visa and RBC Target
The main advantage of trading using opposite Visa and RBC Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, RBC Target 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 RBC Target will offset losses from the drop in RBC Target's long position.Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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