Correlation Between Visa and AIB Group
Can any of the company-specific risk be diversified away by investing in both Visa and AIB Group 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 AIB Group 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 AIB Group PLC, you can compare the effects of market volatilities on Visa and AIB Group 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 AIB Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and AIB Group.
Diversification Opportunities for Visa and AIB Group
Poor diversification
The 3 months correlation between Visa and AIB is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and AIB Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIB Group PLC 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 AIB Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIB Group PLC has no effect on the direction of Visa i.e., Visa and AIB Group go up and down completely randomly.
Pair Corralation between Visa and AIB Group
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.63 times more return on investment than AIB Group. However, Visa Class A is 1.6 times less risky than AIB Group. It trades about 0.08 of its potential returns per unit of risk. AIB Group PLC is currently generating about 0.04 per unit of risk. If you would invest 23,546 in Visa Class A on January 9, 2025 and sell it today you would earn a total of 9,677 from holding Visa Class A or generate 41.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.33% |
| Values | Daily Returns |
Visa Class A vs. AIB Group PLC
Performance |
| Timeline |
| Visa Class A |
| AIB Group PLC |
Visa and AIB Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and AIB Group
The main advantage of trading using opposite Visa and AIB Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, AIB Group 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 AIB Group will offset losses from the drop in AIB Group's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| AIB Group vs. Bank of Ireland | AIB Group vs. Glanbia PLC | AIB Group vs. Kingspan Group plc | AIB Group vs. Ryanair Holdings plc |
Check out your portfolio center.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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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