Correlation Between Visa and ATAI Life

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

Diversification Opportunities for Visa and ATAI Life

0.87

Correlation Coefficient

Visa  ATAI Life

Very poor diversification

The 3 months correlation between Visa and ATAI is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and ATAI Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATAI Life Sciences 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 ATAI Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATAI Life Sciences has no effect on the direction of Visa i.e., Visa and ATAI Life go up and down completely randomly.

Pair Corralation between Visa and ATAI Life

Taking into account the 90-day investment horizon Visa is expected to generate 3.87 times less return on investment than ATAI Life. But when comparing it to its historical volatility, Visa Class A is 7.58 times less risky than ATAI Life. It trades about 0.1 of its potential returns per unit of risk. ATAI Life Sciences is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  135.00  in ATAI Life Sciences on September 14, 2024 and sell it today you would earn a total of  4.00  from holding ATAI Life Sciences or generate 2.96% return on investment over 90 days.

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

Visa Class A  vs.  ATAI Life Sciences

Visa Class A

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) 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.

ATAI Life Sciences

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ATAI Life Sciences are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, ATAI Life demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and ATAI Life

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

The idea behind Visa Class A and ATAI Life Sciences 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.