Correlation Between Visa and Skandinaviska Enskilda

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

Diversification Opportunities for Visa and Skandinaviska Enskilda

-0.24

Correlation Coefficient

Visa  Skandinaviska Enskilda

Very good diversification

The 3 months correlation between Visa and Skandinaviska is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Skandinaviska Enskilda Banken in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skandinaviska Enskilda 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 Skandinaviska Enskilda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skandinaviska Enskilda has no effect on the direction of Visa i.e., Visa and Skandinaviska Enskilda go up and down completely randomly.

Pair Corralation between Visa and Skandinaviska Enskilda

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.68 times more return on investment than Skandinaviska Enskilda. However, Visa Class A is 1.47 times less risky than Skandinaviska Enskilda. It trades about 0.18 of its potential returns per unit of risk. Skandinaviska Enskilda Banken is currently generating about 0.07 per unit of risk. If you would invest  27,694  in Visa Class A on October 10, 2024 and sell it today you would earn a total of  3,473  from holding Visa Class A or generate 12.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Visa Class A  vs.  Skandinaviska Enskilda Banken

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 may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Skandinaviska Enskilda

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Skandinaviska Enskilda Banken are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, Skandinaviska Enskilda may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Visa and Skandinaviska Enskilda

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

The idea behind Visa Class A and Skandinaviska Enskilda Banken 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.