Correlation Between Visa and TomTom NV

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

Diversification Opportunities for Visa and TomTom NV

-0.84

Correlation Coefficient

Visa  TomTom NV

Pay attention - limited upside

The 3 months correlation between Visa and TomTom is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and TomTom NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TomTom NV 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 TomTom NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TomTom NV has no effect on the direction of Visa i.e., Visa and TomTom NV go up and down completely randomly.

Pair Corralation between Visa and TomTom NV

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.36 times more return on investment than TomTom NV. However, Visa Class A is 2.74 times less risky than TomTom NV. It trades about 0.06 of its potential returns per unit of risk. TomTom NV is currently generating about -0.12 per unit of risk. If you would invest  34,524  in Visa Class A on December 5, 2024 and sell it today you would earn a total of  428.00  from holding Visa Class A or generate 1.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Visa Class A  vs.  TomTom NV

Visa Class A

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 23 (%) 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.

TomTom NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days TomTom NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Visa and TomTom NV

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

The idea behind Visa Class A and TomTom NV 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.