Correlation Between Visa and ENGIE ADR1

Can any of the company-specific risk be diversified away by investing in both Visa and ENGIE ADR1 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 ENGIE ADR1 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 ENGIE ADR1 EO, you can compare the effects of market volatilities on Visa and ENGIE ADR1 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 ENGIE ADR1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and ENGIE ADR1.

Diversification Opportunities for Visa and ENGIE ADR1

-0.72

Correlation Coefficient

Visa  ENGIE ADR1

Pay attention - limited upside

The 3 months correlation between Visa and ENGIE is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and ENGIE ADR1 EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENGIE ADR1 EO 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 ENGIE ADR1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENGIE ADR1 EO has no effect on the direction of Visa i.e., Visa and ENGIE ADR1 go up and down completely randomly.

Pair Corralation between Visa and ENGIE ADR1

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.67 times more return on investment than ENGIE ADR1. However, Visa Class A is 1.49 times less risky than ENGIE ADR1. It trades about 0.09 of its potential returns per unit of risk. ENGIE ADR1 EO is currently generating about 0.04 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  11,132  from holding Visa Class A or generate 53.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.22%
Values	Daily Returns

Visa Class A  vs.  ENGIE ADR1 EO

Visa Class A

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 20 (%) 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.

ENGIE ADR1 EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ENGIE ADR1 EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, ENGIE ADR1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Visa and ENGIE ADR1

The main advantage of trading using opposite Visa and ENGIE ADR1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, ENGIE ADR1 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 ENGIE ADR1 will offset losses from the drop in ENGIE ADR1's long position.

The idea behind Visa Class A and ENGIE ADR1 EO 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.