Correlation Between Visa and Scandinavian Brake
Can any of the company-specific risk be diversified away by investing in both Visa and Scandinavian Brake 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 Scandinavian Brake 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 Scandinavian Brake Systems, you can compare the effects of market volatilities on Visa and Scandinavian Brake 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 Scandinavian Brake. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Scandinavian Brake.
Diversification Opportunities for Visa and Scandinavian Brake
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and Scandinavian is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Scandinavian Brake Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Brake 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 Scandinavian Brake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandinavian Brake has no effect on the direction of Visa i.e., Visa and Scandinavian Brake go up and down completely randomly.
Pair Corralation between Visa and Scandinavian Brake
Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.0 times more return on investment than Scandinavian Brake. However, Visa Class A is 1.0 times less risky than Scandinavian Brake. It trades about 0.17 of its potential returns per unit of risk. Scandinavian Brake Systems is currently generating about 0.03 per unit of risk. If you would invest 26,058 in Visa Class A on October 26, 2024 and sell it today you would earn a total of 6,951 from holding Visa Class A or generate 26.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Scandinavian Brake Systems
Performance |
| Timeline |
| Visa Class A |
| Scandinavian Brake |
Visa and Scandinavian Brake Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Scandinavian Brake
The main advantage of trading using opposite Visa and Scandinavian Brake positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Scandinavian Brake 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 Scandinavian Brake will offset losses from the drop in Scandinavian Brake's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Scandinavian Brake vs. SKAKO AS | Scandinavian Brake vs. Newcap Holding AS | Scandinavian Brake vs. Columbus AS | Scandinavian Brake vs. Rovsing AS |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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