Correlation Between Visa and Tekna Holding

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

Diversification Opportunities for Visa and Tekna Holding

0.68

Correlation Coefficient

Visa  Tekna Holding

Poor diversification

The 3 months correlation between Visa and Tekna is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Tekna Holding AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tekna Holding 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 Tekna Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tekna Holding AS has no effect on the direction of Visa i.e., Visa and Tekna Holding go up and down completely randomly.

Pair Corralation between Visa and Tekna Holding

Taking into account the 90-day investment horizon Visa is expected to generate 5.33 times less return on investment than Tekna Holding. But when comparing it to its historical volatility, Visa Class A is 7.98 times less risky than Tekna Holding. It trades about 0.28 of its potential returns per unit of risk. Tekna Holding AS is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  393.00  in Tekna Holding AS on December 5, 2024 and sell it today you would earn a total of  98.00  from holding Tekna Holding AS or generate 24.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Visa Class A  vs.  Tekna Holding AS

Visa Class A

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 23 (%) 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.

Tekna Holding AS

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tekna Holding AS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Tekna Holding displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Tekna Holding

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

The idea behind Visa Class A and Tekna Holding 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.