Correlation Between Visa and Warner Bros

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

Diversification Opportunities for Visa and Warner Bros

0.38

Correlation Coefficient

Visa  Warner Bros

Weak diversification

The 3 months correlation between Visa and Warner is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Warner Bros Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warner Bros Discovery 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 Warner Bros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warner Bros Discovery has no effect on the direction of Visa i.e., Visa and Warner Bros go up and down completely randomly.

Pair Corralation between Visa and Warner Bros

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.42 times more return on investment than Warner Bros. However, Visa Class A is 2.37 times less risky than Warner Bros. It trades about 0.12 of its potential returns per unit of risk. Warner Bros Discovery is currently generating about 0.03 per unit of risk. If you would invest  32,037  in Visa Class A on December 26, 2024 and sell it today you would earn a total of  2,425  from holding Visa Class A or generate 7.57% return on investment over 90 days.

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

Visa Class A  vs.  Warner Bros Discovery

Visa Class A

Risk-Adjusted Performance

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 April 2025.

Warner Bros Discovery

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Bros Discovery are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Warner Bros is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Visa and Warner Bros

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

The idea behind Visa Class A and Warner Bros Discovery 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.