Correlation Between Visa and Viafin Service

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

Diversification Opportunities for Visa and Viafin Service

0.6

Correlation Coefficient

Visa  Viafin Service

Poor diversification

The 3 months correlation between Visa and Viafin is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Viafin Service Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viafin Service Oyj 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 Viafin Service. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viafin Service Oyj has no effect on the direction of Visa i.e., Visa and Viafin Service go up and down completely randomly.

Pair Corralation between Visa and Viafin Service

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.02 times more return on investment than Viafin Service. However, Visa is 1.02 times more volatile than Viafin Service Oyj. It trades about 0.05 of its potential returns per unit of risk. Viafin Service Oyj is currently generating about 0.05 per unit of risk. If you would invest  31,722  in Visa Class A on October 23, 2024 and sell it today you would earn a total of  240.00  from holding Visa Class A or generate 0.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	83.33%
Values	Daily Returns

Visa Class A  vs.  Viafin Service Oyj

Visa Class A

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 15 (%) 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.

Viafin Service Oyj

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Viafin Service Oyj are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Viafin Service 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 Viafin Service

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

The idea behind Visa Class A and Viafin Service Oyj 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.