Correlation Between Visa and AIB Group

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

Diversification Opportunities for Visa and AIB Group

0.49

Correlation Coefficient

Visa  AIB Group

Very weak diversification

The 3 months correlation between Visa and AIB is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and AIB Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIB Group plc 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 AIB Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIB Group plc has no effect on the direction of Visa i.e., Visa and AIB Group go up and down completely randomly.

Pair Corralation between Visa and AIB Group

Taking into account the 90-day investment horizon Visa is expected to generate 1.59 times less return on investment than AIB Group. But when comparing it to its historical volatility, Visa Class A is 2.58 times less risky than AIB Group. It trades about 0.09 of its potential returns per unit of risk. AIB Group plc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  373.00  in AIB Group plc on September 23, 2024 and sell it today you would earn a total of  134.00  from holding AIB Group plc or generate 35.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.54%
Values	Daily Returns

Visa Class A  vs.  AIB Group plc

Visa Class A

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AIB Group plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AIB Group plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, AIB Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Visa and AIB Group

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

The idea behind Visa Class A and AIB Group plc 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.