Correlation Between Visa and TriCo Bancshares
Can any of the company-specific risk be diversified away by investing in both Visa and TriCo Bancshares 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 TriCo Bancshares 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 TriCo Bancshares, you can compare the effects of market volatilities on Visa and TriCo Bancshares 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 TriCo Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and TriCo Bancshares.
Diversification Opportunities for Visa and TriCo Bancshares
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Visa and TriCo is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and TriCo Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TriCo Bancshares 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 TriCo Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TriCo Bancshares has no effect on the direction of Visa i.e., Visa and TriCo Bancshares go up and down completely randomly.
Pair Corralation between Visa and TriCo Bancshares
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.51 times more return on investment than TriCo Bancshares. However, Visa Class A is 1.95 times less risky than TriCo Bancshares. It trades about 0.14 of its potential returns per unit of risk. TriCo Bancshares is currently generating about 0.07 per unit of risk. If you would invest 27,809 in Visa Class A on September 5, 2024 and sell it today you would earn a total of 3,181 from holding Visa Class A or generate 11.44% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Visa Class A vs. TriCo Bancshares
Performance |
Timeline |
Visa Class A |
TriCo Bancshares |
Visa and TriCo Bancshares Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Visa and TriCo Bancshares
The main advantage of trading using opposite Visa and TriCo Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, TriCo Bancshares 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 TriCo Bancshares will offset losses from the drop in TriCo Bancshares' 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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