Correlation Between Visa and Danish Aerospace

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

Diversification Opportunities for Visa and Danish Aerospace

-0.73

Correlation Coefficient

Visa  Danish Aerospace

Pay attention - limited upside

The 3 months correlation between Visa and Danish is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Danish Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danish Aerospace 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 Danish Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danish Aerospace has no effect on the direction of Visa i.e., Visa and Danish Aerospace go up and down completely randomly.

Pair Corralation between Visa and Danish Aerospace

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.24 times more return on investment than Danish Aerospace. However, Visa Class A is 4.22 times less risky than Danish Aerospace. It trades about 0.19 of its potential returns per unit of risk. Danish Aerospace is currently generating about -0.12 per unit of risk. If you would invest  28,322  in Visa Class A on October 23, 2024 and sell it today you would earn a total of  3,640  from holding Visa Class A or generate 12.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Visa Class A  vs.  Danish Aerospace

Visa Class A

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 15 (%) 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.

Danish Aerospace

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Danish Aerospace has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Visa and Danish Aerospace

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

The idea behind Visa Class A and Danish Aerospace 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.