Correlation Between Visa and Fingerprint Cards

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

Diversification Opportunities for Visa and Fingerprint Cards

-0.64

Correlation Coefficient

Visa  Fingerprint Cards

Excellent diversification

The 3 months correlation between Visa and Fingerprint is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Fingerprint Cards AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fingerprint Cards 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 Fingerprint Cards. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fingerprint Cards has no effect on the direction of Visa i.e., Visa and Fingerprint Cards go up and down completely randomly.

Pair Corralation between Visa and Fingerprint Cards

Taking into account the 90-day investment horizon Visa is expected to generate 9.26 times less return on investment than Fingerprint Cards. But when comparing it to its historical volatility, Visa Class A is 19.59 times less risky than Fingerprint Cards. It trades about 0.13 of its potential returns per unit of risk. Fingerprint Cards AB is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1.64  in Fingerprint Cards AB on December 30, 2024 and sell it today you would lose (0.41) from holding Fingerprint Cards AB or give up 25.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Visa Class A  vs.  Fingerprint Cards AB

Visa Class A

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 10 (%) 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 April 2025.

Fingerprint Cards

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fingerprint Cards AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Fingerprint Cards sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Fingerprint Cards

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

The idea behind Visa Class A and Fingerprint Cards AB 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.