Correlation Between Visa and Aberdeen Tax-free

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

Diversification Opportunities for Visa and Aberdeen Tax-free

0.75

Correlation Coefficient

Visa  Aberdeen Tax-free

Poor diversification

The 3 months correlation between Visa and Aberdeen is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Aberdeen Tax Free Incm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Tax Free 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 Aberdeen Tax-free. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Tax Free has no effect on the direction of Visa i.e., Visa and Aberdeen Tax-free go up and down completely randomly.

Pair Corralation between Visa and Aberdeen Tax-free

Taking into account the 90-day investment horizon Visa Class A is expected to generate 4.57 times more return on investment than Aberdeen Tax-free. However, Visa is 4.57 times more volatile than Aberdeen Tax Free Incm. It trades about 0.13 of its potential returns per unit of risk. Aberdeen Tax Free Incm is currently generating about -0.01 per unit of risk. If you would invest  31,812  in Visa Class A on December 27, 2024 and sell it today you would earn a total of  2,606  from holding Visa Class A or generate 8.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Visa Class A  vs.  Aberdeen Tax Free Incm

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 9 (%) 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.

Aberdeen Tax Free

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aberdeen Tax Free Incm has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Aberdeen Tax-free is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and Aberdeen Tax-free

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

The idea behind Visa Class A and Aberdeen Tax Free Incm 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.