Correlation Between Visa and Maj Invest

Can any of the company-specific risk be diversified away by investing in both Visa and Maj Invest 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 Maj Invest 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 Maj Invest Danske, you can compare the effects of market volatilities on Visa and Maj Invest 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 Maj Invest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Maj Invest.

Diversification Opportunities for Visa and Maj Invest

0.4

Correlation Coefficient

Visa  Maj Invest

Very weak diversification

The 3 months correlation between Visa and Maj is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Maj Invest Danske in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maj Invest Danske 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 Maj Invest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maj Invest Danske has no effect on the direction of Visa i.e., Visa and Maj Invest go up and down completely randomly.

Pair Corralation between Visa and Maj Invest

Taking into account the 90-day investment horizon Visa Class A is expected to under-perform the Maj Invest. In addition to that, Visa is 1.34 times more volatile than Maj Invest Danske. It trades about -0.15 of its total potential returns per unit of risk. Maj Invest Danske is currently generating about -0.15 per unit of volatility. If you would invest  18,802  in Maj Invest Danske on January 25, 2024 and sell it today you would lose (272.00) from holding Maj Invest Danske or give up 1.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.91%
Values	Daily Returns

Visa Class A  vs.  Maj Invest Danske

Visa Class A

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Visa is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Maj Invest Danske

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Maj Invest Danske are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking signals, Maj Invest is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and Maj Invest

The main advantage of trading using opposite Visa and Maj Invest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Maj Invest 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 Maj Invest will offset losses from the drop in Maj Invest's long position.

The idea behind Visa Class A and Maj Invest Danske pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.