Correlation Between Visa and Nio
Can any of the company-specific risk be diversified away by investing in both Visa and Nio 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 Nio 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 Nio Class A, you can compare the effects of market volatilities on Visa and Nio 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 Nio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Nio.
Diversification Opportunities for Visa and Nio
Average diversification
The 3 months correlation between Visa and Nio is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Nio Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nio Class A 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 Nio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nio Class A has no effect on the direction of Visa i.e., Visa and Nio go up and down completely randomly.
Pair Corralation between Visa and Nio
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.18 times more return on investment than Nio. However, Visa Class A is 5.44 times less risky than Nio. It trades about -0.18 of its potential returns per unit of risk. Nio Class A is currently generating about -0.25 per unit of risk. If you would invest 28,121 in Visa Class A on January 25, 2024 and sell it today you would lose (710.00) from holding Visa Class A or give up 2.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Nio Class A
Performance |
| Timeline |
| Visa Class A |
| Nio Class A |
Visa and Nio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Nio
The main advantage of trading using opposite Visa and Nio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Nio 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 Nio will offset losses from the drop in Nio's long position.| Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart HoldingsInc | Visa vs. Ally Financial |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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