Correlation Between Visa and NAMCO BANDAI

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

Diversification Opportunities for Visa and NAMCO BANDAI

0.86

Correlation Coefficient

Visa  NAMCO BANDAI

Very poor diversification

The 3 months correlation between Visa and NAMCO is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and NAMCO BANDAI HLDG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAMCO BANDAI HLDG 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 NAMCO BANDAI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NAMCO BANDAI HLDG has no effect on the direction of Visa i.e., Visa and NAMCO BANDAI go up and down completely randomly.

Pair Corralation between Visa and NAMCO BANDAI

Taking into account the 90-day investment horizon Visa is expected to generate 4.9 times less return on investment than NAMCO BANDAI. But when comparing it to its historical volatility, Visa Class A is 2.88 times less risky than NAMCO BANDAI. It trades about 0.11 of its potential returns per unit of risk. NAMCO BANDAI HLDG is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,269  in NAMCO BANDAI HLDG on December 19, 2024 and sell it today you would earn a total of  805.00  from holding NAMCO BANDAI HLDG or generate 35.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

Visa Class A  vs.  NAMCO BANDAI HLDG

Visa Class A

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) 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.

NAMCO BANDAI HLDG

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NAMCO BANDAI HLDG are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, NAMCO BANDAI exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and NAMCO BANDAI

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

The idea behind Visa Class A and NAMCO BANDAI HLDG 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.