Correlation Between Visa and Norofert

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

Diversification Opportunities for Visa and Norofert

0.49

Correlation Coefficient

Visa  Norofert

Very weak diversification

The 3 months correlation between Visa and Norofert is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Norofert SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norofert SA 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 Norofert. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norofert SA has no effect on the direction of Visa i.e., Visa and Norofert go up and down completely randomly.

Pair Corralation between Visa and Norofert

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.54 times more return on investment than Norofert. However, Visa Class A is 1.84 times less risky than Norofert. It trades about 0.1 of its potential returns per unit of risk. Norofert SA is currently generating about -0.13 per unit of risk. If you would invest  31,470  in Visa Class A on September 28, 2024 and sell it today you would earn a total of  595.00  from holding Visa Class A or generate 1.89% return on investment over 90 days.

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

Visa Class A  vs.  Norofert SA

Visa Class A

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Norofert SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Norofert SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Norofert is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Visa and Norofert

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

The idea behind Visa Class A and Norofert SA 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.