Correlation Between Visa and SP Group

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

Diversification Opportunities for Visa and SP Group

-0.3

Correlation Coefficient

Visa  SP Group

Very good diversification

The 3 months correlation between Visa and SPG is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and SP Group AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP Group AS 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 SP Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP Group AS has no effect on the direction of Visa i.e., Visa and SP Group go up and down completely randomly.

Pair Corralation between Visa and SP Group

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.47 times more return on investment than SP Group. However, Visa Class A is 2.14 times less risky than SP Group. It trades about 0.09 of its potential returns per unit of risk. SP Group AS is currently generating about 0.03 per unit of risk. If you would invest  21,003  in Visa Class A on September 4, 2024 and sell it today you would earn a total of  10,662  from holding Visa Class A or generate 50.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Visa Class A  vs.  SP Group AS

Visa Class A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 12 (%) 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.

SP Group AS

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SP Group AS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, SP Group is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Visa and SP Group

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

The idea behind Visa Class A and SP Group AS 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.