Correlation Between Visa and Sitowise Group

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

Diversification Opportunities for Visa and Sitowise Group

-0.61

Correlation Coefficient

Visa  Sitowise Group

Excellent diversification

The 3 months correlation between Visa and Sitowise is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Sitowise Group Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sitowise Group Oyj 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 Sitowise Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sitowise Group Oyj has no effect on the direction of Visa i.e., Visa and Sitowise Group go up and down completely randomly.

Pair Corralation between Visa and Sitowise Group

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.37 times more return on investment than Sitowise Group. However, Visa Class A is 2.7 times less risky than Sitowise Group. It trades about 0.14 of its potential returns per unit of risk. Sitowise Group Oyj is currently generating about 0.04 per unit of risk. If you would invest  27,809  in Visa Class A on September 5, 2024 and sell it today you would earn a total of  3,181  from holding Visa Class A or generate 11.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Visa Class A  vs.  Sitowise Group Oyj

Visa Class A

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 10 (%) 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 January 2025.

Sitowise Group Oyj

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sitowise Group Oyj are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Sitowise Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Visa and Sitowise Group

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

The idea behind Visa Class A and Sitowise Group Oyj 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.