Correlation Between Visa and Demant AS
Can any of the company-specific risk be diversified away by investing in both Visa and Demant AS 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 Demant AS 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 Demant AS ADR, you can compare the effects of market volatilities on Visa and Demant AS 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 Demant AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Demant AS.
Diversification Opportunities for Visa and Demant AS
Excellent diversification
The 3 months correlation between Visa and Demant is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Demant AS ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Demant AS ADR 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 Demant AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Demant AS ADR has no effect on the direction of Visa i.e., Visa and Demant AS go up and down completely randomly.
Pair Corralation between Visa and Demant AS
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.53 times more return on investment than Demant AS. However, Visa Class A is 1.88 times less risky than Demant AS. It trades about 0.09 of its potential returns per unit of risk. Demant AS ADR is currently generating about 0.04 per unit of risk. If you would invest 20,548 in Visa Class A on August 30, 2024 and sell it today you would earn a total of 10,922 from holding Visa Class A or generate 53.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Demant AS ADR
Performance |
| Timeline |
| Visa Class A |
| Demant AS ADR |
Visa and Demant AS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Demant AS
The main advantage of trading using opposite Visa and Demant AS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Demant AS 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 Demant AS will offset losses from the drop in Demant AS's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Demant AS vs. CochLear Ltd ADR | Demant AS vs. GN Store Nord | Demant AS vs. GN Store Nord | Demant AS vs. Siemens Healthineers AG |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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