Correlation Between Visa and Airbus Group

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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

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Visa and Airbus is 0.68. 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 Class A is expected to generate 0.73 times more return on investment than Airbus Group. However, Visa Class A is 1.36 times less risky than Airbus Group. It trades about 0.09 of its potential returns per unit of risk. Airbus Group SE is currently generating about 0.06 per unit of risk. If you would invest  20,370  in Visa Class A on September 6, 2024 and sell it today you would earn a total of  10,620  from holding Visa Class A or generate 52.14% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.02%
ValuesDaily Returns

Visa Class A  vs.  Airbus Group SE

 Performance 
       Timeline  
Visa Class A 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 10 (%) 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 January 2025.
Airbus Group SE 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Airbus Group SE are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Airbus Group sustained solid returns over the last few months and may actually be approaching a breakup point.

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.
The idea behind Visa Class A and Airbus Group SE 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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