Correlation Between Visa and Airbnb

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

Diversification Opportunities for Visa and Airbnb

0.17

Correlation Coefficient

Visa  Airbnb

Average diversification

The 3 months correlation between Visa and Airbnb is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Airbnb Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airbnb Inc 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 Airbnb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airbnb Inc has no effect on the direction of Visa i.e., Visa and Airbnb go up and down completely randomly.

Pair Corralation between Visa and Airbnb

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.39 times more return on investment than Airbnb. However, Visa Class A is 2.57 times less risky than Airbnb. It trades about 0.08 of its potential returns per unit of risk. Airbnb Inc is currently generating about -0.06 per unit of risk. If you would invest  32,037  in Visa Class A on December 25, 2024 and sell it today you would earn a total of  1,529  from holding Visa Class A or generate 4.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Visa Class A  vs.  Airbnb Inc

Visa Class A

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Visa is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Airbnb Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Airbnb Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Visa and Airbnb

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

The idea behind Visa Class A and Airbnb Inc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.