Correlation Between Visa and Westwood Alternative
Can any of the company-specific risk be diversified away by investing in both Visa and Westwood Alternative 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 Westwood Alternative 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 Westwood Alternative Income, you can compare the effects of market volatilities on Visa and Westwood Alternative 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 Westwood Alternative. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Westwood Alternative.
Diversification Opportunities for Visa and Westwood Alternative
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and Westwood is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Westwood Alternative Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Alternative 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 Westwood Alternative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood Alternative has no effect on the direction of Visa i.e., Visa and Westwood Alternative go up and down completely randomly.
Pair Corralation between Visa and Westwood Alternative
Taking into account the 90-day investment horizon Visa Class A is expected to generate 14.11 times more return on investment than Westwood Alternative. However, Visa is 14.11 times more volatile than Westwood Alternative Income. It trades about 0.13 of its potential returns per unit of risk. Westwood Alternative Income is currently generating about 0.46 per unit of risk. If you would invest 31,812 in Visa Class A on December 27, 2024 and sell it today you would earn a total of 2,606 from holding Visa Class A or generate 8.19% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Visa Class A vs. Westwood Alternative Income
Performance |
Timeline |
Visa Class A |
Westwood Alternative |
Visa and Westwood Alternative Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Visa and Westwood Alternative
The main advantage of trading using opposite Visa and Westwood Alternative positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Westwood Alternative 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 Westwood Alternative will offset losses from the drop in Westwood Alternative'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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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