Correlation Between Visa and STM Group
Can any of the company-specific risk be diversified away by investing in both Visa and STM 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 STM 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 STM Group Plc, you can compare the effects of market volatilities on Visa and STM 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 STM Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and STM Group.
Diversification Opportunities for Visa and STM Group
Poor diversification
The 3 months correlation between Visa and STM is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and STM Group Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STM 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 STM Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STM Group Plc has no effect on the direction of Visa i.e., Visa and STM Group go up and down completely randomly.
Pair Corralation between Visa and STM Group
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.54 times more return on investment than STM Group. However, Visa Class A is 1.86 times less risky than STM Group. It trades about 0.34 of its potential returns per unit of risk. STM Group Plc is currently generating about 0.15 per unit of risk. If you would invest 28,365 in Visa Class A on August 29, 2024 and sell it today you would earn a total of 2,817 from holding Visa Class A or generate 9.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 22.73% |
| Values | Daily Returns |
Visa Class A vs. STM Group Plc
Performance |
| Timeline |
| Visa Class A |
| STM Group Plc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Visa and STM Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and STM Group
The main advantage of trading using opposite Visa and STM Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, STM 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 STM Group will offset losses from the drop in STM Group's long position.| Visa vs. American Express | Visa vs. Morningstar Unconstrained Allocation | Visa vs. Sitka Gold Corp | Visa vs. MSCI ACWI exAUCONSUMER |
| STM Group vs. Silvercorp Metals | STM Group vs. Bisichi Mining PLC | STM Group vs. International Consolidated Airlines | STM Group vs. Greenroc Mining 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
Other Complementary Tools
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |