Correlation Between Visa and Ubisoft Entertainment

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

Diversification Opportunities for Visa and Ubisoft Entertainment

-0.04

Correlation Coefficient

Visa  Ubisoft Entertainment

Good diversification

The 3 months correlation between Visa and Ubisoft is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Ubisoft Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ubisoft Entertainment 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 Ubisoft Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ubisoft Entertainment has no effect on the direction of Visa i.e., Visa and Ubisoft Entertainment go up and down completely randomly.

Pair Corralation between Visa and Ubisoft Entertainment

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.25 times more return on investment than Ubisoft Entertainment. However, Visa Class A is 4.03 times less risky than Ubisoft Entertainment. It trades about 0.08 of its potential returns per unit of risk. Ubisoft Entertainment is currently generating about -0.04 per unit of risk. If you would invest  25,641  in Visa Class A on September 12, 2024 and sell it today you would earn a total of  5,597  from holding Visa Class A or generate 21.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Visa Class A  vs.  Ubisoft Entertainment

Visa Class A

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 9 (%) 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.

Ubisoft Entertainment

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ubisoft Entertainment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Ubisoft Entertainment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Ubisoft Entertainment

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

The idea behind Visa Class A and Ubisoft Entertainment 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.