Correlation Between Visa and Swiss Life

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

Diversification Opportunities for Visa and Swiss Life

-0.62

Correlation Coefficient

Visa  Swiss Life

Excellent diversification

The 3 months correlation between Visa and Swiss is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Swiss Life Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swiss Life Holding 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 Swiss Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swiss Life Holding has no effect on the direction of Visa i.e., Visa and Swiss Life go up and down completely randomly.

Pair Corralation between Visa and Swiss Life

Taking into account the 90-day investment horizon Visa is expected to generate 1.02 times less return on investment than Swiss Life. But when comparing it to its historical volatility, Visa Class A is 1.23 times less risky than Swiss Life. It trades about 0.08 of its potential returns per unit of risk. Swiss Life Holding is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,230  in Swiss Life Holding on September 14, 2024 and sell it today you would earn a total of  700.00  from holding Swiss Life Holding or generate 21.67% return on investment over 90 days.

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

Visa Class A  vs.  Swiss Life Holding

Visa Class A

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Swiss Life Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Swiss Life Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Swiss Life is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and Swiss Life

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

The idea behind Visa Class A and Swiss Life Holding 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.