Correlation Between Visa and Invesco EURO

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

Diversification Opportunities for Visa and Invesco EURO

-0.23

Correlation Coefficient

Visa  Invesco EURO

Very good diversification

The 3 months correlation between Visa and Invesco is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Invesco EURO STOXX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco EURO STOXX 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 Invesco EURO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco EURO STOXX has no effect on the direction of Visa i.e., Visa and Invesco EURO go up and down completely randomly.

Pair Corralation between Visa and Invesco EURO

Taking into account the 90-day investment horizon Visa is expected to generate 1.23 times less return on investment than Invesco EURO. But when comparing it to its historical volatility, Visa Class A is 1.34 times less risky than Invesco EURO. It trades about 0.07 of its potential returns per unit of risk. Invesco EURO STOXX is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  601,900  in Invesco EURO STOXX on October 11, 2024 and sell it today you would earn a total of  310,100  from holding Invesco EURO STOXX or generate 51.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Visa Class A  vs.  Invesco EURO STOXX

Visa Class A

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 14 (%) 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.

Invesco EURO STOXX

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco EURO STOXX are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Invesco EURO is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Visa and Invesco EURO

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

The idea behind Visa Class A and Invesco EURO STOXX 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.