Correlation Between Visa and Hofseth Biocare

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

Diversification Opportunities for Visa and Hofseth Biocare

0.49

Correlation Coefficient

Visa  Hofseth Biocare

Very weak diversification

The 3 months correlation between Visa and Hofseth is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Hofseth Biocare ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hofseth Biocare ASA 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 Hofseth Biocare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hofseth Biocare ASA has no effect on the direction of Visa i.e., Visa and Hofseth Biocare go up and down completely randomly.

Pair Corralation between Visa and Hofseth Biocare

Taking into account the 90-day investment horizon Visa is expected to generate 4.3 times less return on investment than Hofseth Biocare. But when comparing it to its historical volatility, Visa Class A is 5.49 times less risky than Hofseth Biocare. It trades about 0.17 of its potential returns per unit of risk. Hofseth Biocare ASA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  170.00  in Hofseth Biocare ASA on December 28, 2024 and sell it today you would earn a total of  79.00  from holding Hofseth Biocare ASA or generate 46.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Visa Class A  vs.  Hofseth Biocare ASA

Visa Class A

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 13 (%) 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.

Hofseth Biocare ASA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hofseth Biocare ASA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Hofseth Biocare disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Hofseth Biocare

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

The idea behind Visa Class A and Hofseth Biocare ASA 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 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.