Correlation Between Visa and KBSTAR EURO

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

Diversification Opportunities for Visa and KBSTAR EURO

0.87

Correlation Coefficient

Visa  KBSTAR EURO

Very poor diversification

The 3 months correlation between Visa and KBSTAR is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and KBSTAR EURO STOXX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KBSTAR EURO STOXX 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 KBSTAR EURO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KBSTAR EURO STOXX has no effect on the direction of Visa i.e., Visa and KBSTAR EURO go up and down completely randomly.

Pair Corralation between Visa and KBSTAR EURO

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.05 times more return on investment than KBSTAR EURO. However, Visa is 1.05 times more volatile than KBSTAR EURO STOXX. It trades about 0.17 of its potential returns per unit of risk. KBSTAR EURO STOXX is currently generating about 0.17 per unit of risk. If you would invest  31,478  in Visa Class A on December 28, 2024 and sell it today you would earn a total of  3,508  from holding Visa Class A or generate 11.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.67%
Values	Daily Returns

Visa Class A  vs.  KBSTAR EURO STOXX

Visa Class A

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 13 (%) 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.

KBSTAR EURO STOXX

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KBSTAR EURO STOXX are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KBSTAR EURO may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Visa and KBSTAR EURO

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

The idea behind Visa Class A and KBSTAR EURO STOXX 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.