Correlation Between Visa and Linde PLC

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

Diversification Opportunities for Visa and Linde PLC

0.88

Correlation Coefficient

Visa  Linde PLC

Very poor diversification

The 3 months correlation between Visa and Linde is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Linde PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linde PLC 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 Linde PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linde PLC has no effect on the direction of Visa i.e., Visa and Linde PLC go up and down completely randomly.

Pair Corralation between Visa and Linde PLC

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.16 times more return on investment than Linde PLC. However, Visa is 1.16 times more volatile than Linde PLC. It trades about 0.13 of its potential returns per unit of risk. Linde PLC is currently generating about 0.12 per unit of risk. If you would invest  31,478  in Visa Class A on December 28, 2024 and sell it today you would earn a total of  2,807  from holding Visa Class A or generate 8.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.83%
Values	Daily Returns

Visa Class A  vs.  Linde PLC

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 10 (%) 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.

Linde PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Linde PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Linde PLC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Visa and Linde PLC

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

The idea behind Visa Class A and Linde PLC 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.

Check out your portfolio center.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.