Correlation Between Visa and Adidas AG
Can any of the company-specific risk be diversified away by investing in both Visa and Adidas AG 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 Adidas AG 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 adidas AG, you can compare the effects of market volatilities on Visa and Adidas AG 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 Adidas AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Adidas AG.
Diversification Opportunities for Visa and Adidas AG
Excellent diversification
The 3 months correlation between Visa and Adidas is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and adidas AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on adidas AG 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 Adidas AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of adidas AG has no effect on the direction of Visa i.e., Visa and Adidas AG go up and down completely randomly.
Pair Corralation between Visa and Adidas AG
Taking into account the 90-day investment horizon Visa is expected to generate 1.57 times less return on investment than Adidas AG. But when comparing it to its historical volatility, Visa Class A is 2.08 times less risky than Adidas AG. It trades about 0.09 of its potential returns per unit of risk. adidas AG is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 6,151 in adidas AG on September 3, 2024 and sell it today you would earn a total of 4,849 from holding adidas AG or generate 78.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.02% |
| Values | Daily Returns |
Visa Class A vs. adidas AG
Performance |
| Timeline |
| Visa Class A |
| adidas AG |
Visa and Adidas AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Adidas AG
The main advantage of trading using opposite Visa and Adidas AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Adidas AG 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 Adidas AG will offset losses from the drop in Adidas AG's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Adidas AG vs. Scandinavian Tobacco Group | Adidas AG vs. NAKED WINES PLC | Adidas AG vs. Goodyear Tire Rubber | Adidas AG vs. SANOK RUBBER ZY |
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 Stocks Directory module to find actively traded stocks across global markets.
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