Correlation Between Visa and KBC Ancora

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

Diversification Opportunities for Visa and KBC Ancora

0.72

Correlation Coefficient

Visa  KBC Ancora

Poor diversification

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

Pair Corralation between Visa and KBC Ancora

Taking into account the 90-day investment horizon Visa is expected to generate 2.69 times less return on investment than KBC Ancora. But when comparing it to its historical volatility, Visa Class A is 1.18 times less risky than KBC Ancora. It trades about 0.08 of its potential returns per unit of risk. KBC Ancora SCA is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  4,800  in KBC Ancora SCA on December 17, 2024 and sell it today you would earn a total of  740.00  from holding KBC Ancora SCA or generate 15.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Visa Class A  vs.  KBC Ancora SCA

Visa Class A

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Visa is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

KBC Ancora SCA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KBC Ancora SCA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, KBC Ancora reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and KBC Ancora

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

The idea behind Visa Class A and KBC Ancora SCA 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.