Correlation Between Visa and Ferrum SA
Can any of the company-specific risk be diversified away by investing in both Visa and Ferrum SA 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 Ferrum SA 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 Ferrum SA, you can compare the effects of market volatilities on Visa and Ferrum SA 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 Ferrum SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Ferrum SA.
Diversification Opportunities for Visa and Ferrum SA
Excellent diversification
The 3 months correlation between Visa and Ferrum is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Ferrum SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferrum SA 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 Ferrum SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferrum SA has no effect on the direction of Visa i.e., Visa and Ferrum SA go up and down completely randomly.
Pair Corralation between Visa and Ferrum SA
Taking into account the 90-day investment horizon Visa is expected to generate 7.41 times less return on investment than Ferrum SA. But when comparing it to its historical volatility, Visa Class A is 2.28 times less risky than Ferrum SA. It trades about 0.09 of its potential returns per unit of risk. Ferrum SA is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 3,875 in Ferrum SA on October 9, 2024 and sell it today you would earn a total of 445.00 from holding Ferrum SA or generate 11.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
Visa Class A vs. Ferrum SA
Performance |
| Timeline |
| Visa Class A |
| Ferrum SA |
Visa and Ferrum SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Ferrum SA
The main advantage of trading using opposite Visa and Ferrum SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Ferrum SA 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 Ferrum SA will offset losses from the drop in Ferrum SA's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Ferrum SA vs. Edesa Holding SA | Ferrum SA vs. United States Steel | Ferrum SA vs. Capex SA | Ferrum SA vs. Pfizer Inc |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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