Correlation Between Visa and Metro AG
Can any of the company-specific risk be diversified away by investing in both Visa and Metro 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 Metro 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 Metro AG, you can compare the effects of market volatilities on Visa and Metro 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 Metro AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Metro AG.
Diversification Opportunities for Visa and Metro AG
Very good diversification
The 3 months correlation between Visa and Metro is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Metro AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro 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 Metro AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro AG has no effect on the direction of Visa i.e., Visa and Metro AG go up and down completely randomly.
Pair Corralation between Visa and Metro AG
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.43 times more return on investment than Metro AG. However, Visa Class A is 2.3 times less risky than Metro AG. It trades about 0.12 of its potential returns per unit of risk. Metro AG is currently generating about 0.02 per unit of risk. If you would invest 28,482 in Visa Class A on September 12, 2024 and sell it today you would earn a total of 2,756 from holding Visa Class A or generate 9.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Visa Class A vs. Metro AG
Performance |
| Timeline |
| Visa Class A |
| Metro AG |
Visa and Metro AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Metro AG
The main advantage of trading using opposite Visa and Metro AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Metro 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 Metro AG will offset losses from the drop in Metro AG's long position.The idea behind Visa Class A and Metro AG 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.| Metro AG vs. Superior Plus Corp | Metro AG vs. SIVERS SEMICONDUCTORS AB | Metro AG vs. NorAm Drilling AS | Metro AG vs. BANK HANDLOWY |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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