Correlation Between Visa and Djurslands Bank

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

Diversification Opportunities for Visa and Djurslands Bank

0.44

Correlation Coefficient

Visa  Djurslands Bank

Very weak diversification

The 3 months correlation between Visa and Djurslands is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Djurslands Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Djurslands Bank 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 Djurslands Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Djurslands Bank has no effect on the direction of Visa i.e., Visa and Djurslands Bank go up and down completely randomly.

Pair Corralation between Visa and Djurslands Bank

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.75 times more return on investment than Djurslands Bank. However, Visa Class A is 1.33 times less risky than Djurslands Bank. It trades about 0.21 of its potential returns per unit of risk. Djurslands Bank is currently generating about 0.12 per unit of risk. If you would invest  27,327  in Visa Class A on October 7, 2024 and sell it today you would earn a total of  4,164  from holding Visa Class A or generate 15.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Visa Class A  vs.  Djurslands Bank

Visa Class A

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 16 (%) 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.

Djurslands Bank

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Djurslands Bank are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Djurslands Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Visa and Djurslands Bank

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

The idea behind Visa Class A and Djurslands Bank 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.