Correlation Between Visa and SAB Biotherapeutics

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

Diversification Opportunities for Visa and SAB Biotherapeutics

-0.51

Correlation Coefficient

Visa  SAB Biotherapeutics

Excellent diversification

The 3 months correlation between Visa and SAB is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and SAB Biotherapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAB Biotherapeutics 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 SAB Biotherapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAB Biotherapeutics has no effect on the direction of Visa i.e., Visa and SAB Biotherapeutics go up and down completely randomly.

Pair Corralation between Visa and SAB Biotherapeutics

Taking into account the 90-day investment horizon Visa is expected to generate 2.88 times less return on investment than SAB Biotherapeutics. But when comparing it to its historical volatility, Visa Class A is 19.71 times less risky than SAB Biotherapeutics. It trades about 0.12 of its potential returns per unit of risk. SAB Biotherapeutics is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  9.00  in SAB Biotherapeutics on December 26, 2024 and sell it today you would lose (6.01) from holding SAB Biotherapeutics or give up 66.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	91.67%
Values	Daily Returns

Visa Class A  vs.  SAB Biotherapeutics

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.

SAB Biotherapeutics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SAB Biotherapeutics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, SAB Biotherapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and SAB Biotherapeutics

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

The idea behind Visa Class A and SAB Biotherapeutics 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.