Correlation Between Visa and American Aires

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

Diversification Opportunities for Visa and American Aires

-0.07

Correlation Coefficient

Visa  American Aires

Good diversification

The 3 months correlation between Visa and American is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and American Aires in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Aires 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 Aires. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Aires has no effect on the direction of Visa i.e., Visa and American Aires go up and down completely randomly.

Pair Corralation between Visa and American Aires

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.14 times more return on investment than American Aires. However, Visa Class A is 6.9 times less risky than American Aires. It trades about 0.15 of its potential returns per unit of risk. American Aires is currently generating about 0.01 per unit of risk. If you would invest  31,812  in Visa Class A on December 27, 2024 and sell it today you would earn a total of  3,174  from holding Visa Class A or generate 9.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Visa Class A  vs.  American Aires

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 11 (%) 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.

American Aires

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Visa and American Aires

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

The idea behind Visa Class A and American Aires 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.