Correlation Between Visa and CyberAgent

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

Diversification Opportunities for Visa and CyberAgent

0.4

Correlation Coefficient

Visa  CyberAgent

Very weak diversification

The 3 months correlation between Visa and CyberAgent is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and CyberAgent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CyberAgent 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 CyberAgent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CyberAgent has no effect on the direction of Visa i.e., Visa and CyberAgent go up and down completely randomly.

Pair Corralation between Visa and CyberAgent

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.42 times more return on investment than CyberAgent. However, Visa Class A is 2.39 times less risky than CyberAgent. It trades about 0.09 of its potential returns per unit of risk. CyberAgent is currently generating about -0.01 per unit of risk. If you would invest  20,933  in Visa Class A on September 25, 2024 and sell it today you would earn a total of  11,122  from holding Visa Class A or generate 53.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.42%
Values	Daily Returns

Visa Class A  vs.  CyberAgent

Visa Class A

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

CyberAgent

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CyberAgent are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CyberAgent may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Visa and CyberAgent

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

The idea behind Visa Class A and CyberAgent 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 Global Correlations module to find global opportunities by holding instruments from different markets.