Correlation Between Visa and Hexagon AB

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

Diversification Opportunities for Visa and Hexagon AB

-0.57

Correlation Coefficient

Visa  Hexagon AB

Excellent diversification

The 3 months correlation between Visa and Hexagon is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Hexagon AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hexagon AB 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 Hexagon AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hexagon AB has no effect on the direction of Visa i.e., Visa and Hexagon AB go up and down completely randomly.

Pair Corralation between Visa and Hexagon AB

Taking into account the 90-day investment horizon Visa is expected to generate 4.36 times less return on investment than Hexagon AB. But when comparing it to its historical volatility, Visa Class A is 3.04 times less risky than Hexagon AB. It trades about 0.09 of its potential returns per unit of risk. Hexagon AB is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  895.00  in Hexagon AB on October 9, 2024 and sell it today you would earn a total of  58.00  from holding Hexagon AB or generate 6.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Visa Class A  vs.  Hexagon AB

Visa Class A

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 15 (%) 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.

Hexagon AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Visa and Hexagon AB

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

The idea behind Visa Class A and Hexagon 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.