Correlation Between Visa and Nordea Norwegian

Can any of the company-specific risk be diversified away by investing in both Visa and Nordea Norwegian 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 Nordea Norwegian 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 Nordea Norwegian Stars, you can compare the effects of market volatilities on Visa and Nordea Norwegian 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 Nordea Norwegian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Nordea Norwegian.

Diversification Opportunities for Visa and Nordea Norwegian

0.58

Correlation Coefficient

Visa  Nordea Norwegian

Very weak diversification

The 3 months correlation between Visa and Nordea is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Nordea Norwegian Stars in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordea Norwegian Stars 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 Nordea Norwegian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordea Norwegian Stars has no effect on the direction of Visa i.e., Visa and Nordea Norwegian go up and down completely randomly.

Pair Corralation between Visa and Nordea Norwegian

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.65 times more return on investment than Nordea Norwegian. However, Visa is 1.65 times more volatile than Nordea Norwegian Stars. It trades about 0.11 of its potential returns per unit of risk. Nordea Norwegian Stars is currently generating about 0.12 per unit of risk. If you would invest  31,718  in Visa Class A on December 20, 2024 and sell it today you would earn a total of  2,232  from holding Visa Class A or generate 7.04% 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.  Nordea Norwegian Stars

Visa Class A

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Nordea Norwegian Stars

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nordea Norwegian Stars are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly strong forward indicators, Nordea Norwegian is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Visa and Nordea Norwegian

The main advantage of trading using opposite Visa and Nordea Norwegian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Nordea Norwegian 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 Nordea Norwegian will offset losses from the drop in Nordea Norwegian's long position.

The idea behind Visa Class A and Nordea Norwegian Stars pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.