Correlation Between Visa and Medartis Holding

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

Diversification Opportunities for Visa and Medartis Holding

-0.15

Correlation Coefficient

Visa  Medartis Holding

Good diversification

The 3 months correlation between Visa and Medartis is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Medartis Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medartis Holding 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 Medartis Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medartis Holding has no effect on the direction of Visa i.e., Visa and Medartis Holding go up and down completely randomly.

Pair Corralation between Visa and Medartis Holding

Taking into account the 90-day investment horizon Visa is expected to generate 35.13 times less return on investment than Medartis Holding. But when comparing it to its historical volatility, Visa Class A is 4.69 times less risky than Medartis Holding. It trades about 0.05 of its potential returns per unit of risk. Medartis Holding AG is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  5,350  in Medartis Holding AG on October 22, 2024 and sell it today you would earn a total of  1,280  from holding Medartis Holding AG or generate 23.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	78.95%
Values	Daily Returns

Visa Class A  vs.  Medartis Holding AG

Visa Class A

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 14 (%) 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 February 2025.

Medartis Holding

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Medartis Holding AG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, Medartis Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Medartis Holding

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

The idea behind Visa Class A and Medartis Holding AG 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.