Correlation Between Visa and American Financial
Can any of the company-specific risk be diversified away by investing in both Visa and American Financial 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 American Financial 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 American Financial Group, you can compare the effects of market volatilities on Visa and American Financial 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 American Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and American Financial.
Diversification Opportunities for Visa and American Financial
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Visa and American is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and American Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Financial 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 American Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Financial has no effect on the direction of Visa i.e., Visa and American Financial go up and down completely randomly.
Pair Corralation between Visa and American Financial
Taking into account the 90-day investment horizon Visa Class A is expected to under-perform the American Financial. But the stock apears to be less risky and, when comparing its historical volatility, Visa Class A is 1.37 times less risky than American Financial. The stock trades about -0.09 of its potential returns per unit of risk. The American Financial Group is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 12,697 in American Financial Group on January 30, 2024 and sell it today you would earn a total of 37.00 from holding American Financial Group or generate 0.29% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Visa Class A vs. American Financial Group
Performance |
Timeline |
Visa Class A |
American Financial |
Visa and American Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Visa and American Financial
The main advantage of trading using opposite Visa and American Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, American Financial 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 American Financial will offset losses from the drop in American Financial's long position.Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart HoldingsInc | Visa vs. Ally Financial |
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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