Correlation Between Visa and Banco

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

Diversification Opportunities for Visa and Banco

-0.19

Correlation Coefficient

Visa  Banco

Good diversification

The 3 months correlation between Visa and Banco is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Banco Santander SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Santander SA 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 Banco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Santander SA has no effect on the direction of Visa i.e., Visa and Banco go up and down completely randomly.

Pair Corralation between Visa and Banco

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.71 times more return on investment than Banco. However, Visa Class A is 1.4 times less risky than Banco. It trades about 0.07 of its potential returns per unit of risk. Banco Santander SA is currently generating about 0.02 per unit of risk. If you would invest  27,437  in Visa Class A on October 9, 2024 and sell it today you would earn a total of  3,730  from holding Visa Class A or generate 13.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	63.98%
Values	Daily Returns

Visa Class A  vs.  Banco Santander SA

Visa Class A

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 14 (%) 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.

Banco Santander SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Santander SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for Banco Santander SA investors.

Pair Trading with Visa and Banco

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

The idea behind Visa Class A and Banco Santander SA 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.