Correlation Between Visa and Koninklijke KPN

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

Diversification Opportunities for Visa and Koninklijke KPN

0.24

Correlation Coefficient

Visa  Koninklijke KPN

Modest diversification

The 3 months correlation between Visa and Koninklijke is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Koninklijke KPN NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koninklijke KPN NV 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 Koninklijke KPN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koninklijke KPN NV has no effect on the direction of Visa i.e., Visa and Koninklijke KPN go up and down completely randomly.

Pair Corralation between Visa and Koninklijke KPN

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.07 times more return on investment than Koninklijke KPN. However, Visa is 1.07 times more volatile than Koninklijke KPN NV. It trades about 0.16 of its potential returns per unit of risk. Koninklijke KPN NV is currently generating about 0.17 per unit of risk. If you would invest  31,478  in Visa Class A on December 29, 2024 and sell it today you would earn a total of  3,508  from holding Visa Class A or generate 11.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

Visa Class A  vs.  Koninklijke KPN NV

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 12 (%) 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.

Koninklijke KPN NV

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Koninklijke KPN NV are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Koninklijke KPN may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Visa and Koninklijke KPN

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

The idea behind Visa Class A and Koninklijke KPN NV 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.