Correlation Between Visa and Daimler Truck

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

Diversification Opportunities for Visa and Daimler Truck

-0.4

Correlation Coefficient

Visa  Daimler Truck

Very good diversification

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

Pair Corralation between Visa and Daimler Truck

Taking into account the 90-day investment horizon Visa is expected to generate 1.18 times less return on investment than Daimler Truck. But when comparing it to its historical volatility, Visa Class A is 1.76 times less risky than Daimler Truck. It trades about 0.08 of its potential returns per unit of risk. Daimler Truck Holding is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,670  in Daimler Truck Holding on October 10, 2024 and sell it today you would earn a total of  1,254  from holding Daimler Truck Holding or generate 46.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.0%
Values	Daily Returns

Visa Class A  vs.  Daimler Truck Holding

Visa Class A

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 14 (%) 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 February 2025.

Daimler Truck Holding

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Daimler Truck Holding are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Daimler Truck unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Daimler Truck

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

The idea behind Visa Class A and Daimler Truck Holding 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.