Correlation Between Visa and Carbios

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

Diversification Opportunities for Visa and Carbios

-0.51

Correlation Coefficient

Visa  Carbios

Excellent diversification

The 3 months correlation between Visa and Carbios is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Carbios in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carbios 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 Carbios. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carbios has no effect on the direction of Visa i.e., Visa and Carbios go up and down completely randomly.

Pair Corralation between Visa and Carbios

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.26 times more return on investment than Carbios. However, Visa Class A is 3.86 times less risky than Carbios. It trades about 0.16 of its potential returns per unit of risk. Carbios is currently generating about -0.02 per unit of risk. If you would invest  31,478  in Visa Class A on December 29, 2024 and sell it today you would earn a total of  3,508  from holding Visa Class A or generate 11.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

Visa Class A  vs.  Carbios

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 12 (%) 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.

Carbios

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carbios has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Visa and Carbios

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

The idea behind Visa Class A and Carbios 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.