Correlation Between Visa and Airbus Group
Can any of the company-specific risk be diversified away by investing in both Visa and Airbus 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 Airbus 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 Airbus Group SE, you can compare the effects of market volatilities on Visa and Airbus 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 Airbus Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Airbus Group.
Diversification Opportunities for Visa and Airbus Group
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and Airbus is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Airbus Group SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airbus Group SE 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 Airbus Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airbus Group SE has no effect on the direction of Visa i.e., Visa and Airbus Group go up and down completely randomly.
Pair Corralation between Visa and Airbus Group
Taking into account the 90-day investment horizon Visa is expected to generate 1.47 times less return on investment than Airbus Group. But when comparing it to its historical volatility, Visa Class A is 1.32 times less risky than Airbus Group. It trades about 0.23 of its potential returns per unit of risk. Airbus Group SE is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 14,028 in Airbus Group SE on September 5, 2024 and sell it today you would earn a total of 1,394 from holding Airbus Group SE or generate 9.94% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 95.65% |
Values | Daily Returns |
Visa Class A vs. Airbus Group SE
Performance |
Timeline |
Visa Class A |
Airbus Group SE |
Visa and Airbus Group Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Visa and Airbus Group
The main advantage of trading using opposite Visa and Airbus Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Airbus 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 Airbus Group will offset losses from the drop in Airbus Group's long position.Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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