Correlation Between Visa and Sebata Holdings

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

Diversification Opportunities for Visa and Sebata Holdings

-0.5

Correlation Coefficient

Visa  Sebata Holdings

Very good diversification

The 3 months correlation between Visa and Sebata is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Sebata Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sebata Holdings 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 Sebata Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sebata Holdings has no effect on the direction of Visa i.e., Visa and Sebata Holdings go up and down completely randomly.

Pair Corralation between Visa and Sebata Holdings

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.25 times more return on investment than Sebata Holdings. However, Visa Class A is 3.94 times less risky than Sebata Holdings. It trades about 0.14 of its potential returns per unit of risk. Sebata Holdings is currently generating about -0.01 per unit of risk. If you would invest  26,144  in Visa Class A on September 26, 2024 and sell it today you would earn a total of  5,921  from holding Visa Class A or generate 22.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Visa Class A  vs.  Sebata Holdings

Visa Class A

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 19 (%) 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.

Sebata Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sebata Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Visa and Sebata Holdings

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

The idea behind Visa Class A and Sebata Holdings 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.