Correlation Between Visa and Publicis Groupe

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

Diversification Opportunities for Visa and Publicis Groupe

-0.19

Correlation Coefficient

Visa  Publicis Groupe

Good diversification

The 3 months correlation between Visa and Publicis is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Publicis Groupe SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Publicis Groupe 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 Publicis Groupe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Publicis Groupe SA has no effect on the direction of Visa i.e., Visa and Publicis Groupe go up and down completely randomly.

Pair Corralation between Visa and Publicis Groupe

Taking into account the 90-day investment horizon Visa is expected to generate 1.51 times less return on investment than Publicis Groupe. But when comparing it to its historical volatility, Visa Class A is 1.76 times less risky than Publicis Groupe. It trades about 0.07 of its potential returns per unit of risk. Publicis Groupe SA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,766  in Publicis Groupe SA on October 23, 2024 and sell it today you would earn a total of  215.00  from holding Publicis Groupe SA or generate 12.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	24.09%
Values	Daily Returns

Visa Class A  vs.  Publicis Groupe SA

Visa Class A

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 15 (%) 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.

Publicis Groupe SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Publicis Groupe SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Publicis Groupe 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 Publicis Groupe

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

The idea behind Visa Class A and Publicis Groupe 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.