Correlation Between Visa and Zalando SE
Can any of the company-specific risk be diversified away by investing in both Visa and Zalando SE 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 Zalando SE 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 Zalando SE, you can compare the effects of market volatilities on Visa and Zalando SE 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 Zalando SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Zalando SE.
Diversification Opportunities for Visa and Zalando SE
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Visa and Zalando is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Zalando SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zalando SE 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 Zalando SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zalando SE has no effect on the direction of Visa i.e., Visa and Zalando SE go up and down completely randomly.
Pair Corralation between Visa and Zalando SE
Taking into account the 90-day investment horizon Visa is expected to generate 22.09 times less return on investment than Zalando SE. But when comparing it to its historical volatility, Visa Class A is 4.76 times less risky than Zalando SE. It trades about 0.08 of its potential returns per unit of risk. Zalando SE is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 2,818 in Zalando SE on September 12, 2024 and sell it today you would earn a total of 850.00 from holding Zalando SE or generate 30.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Zalando SE
Performance |
| Timeline |
| Visa Class A |
| Zalando SE |
Visa and Zalando SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Zalando SE
The main advantage of trading using opposite Visa and Zalando SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Zalando SE 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 Zalando SE will offset losses from the drop in Zalando SE's long position.| Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart Holdings | Visa vs. Ally Financial |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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