Correlation Between Visa and Netcompany Group

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

Diversification Opportunities for Visa and Netcompany Group

0.67

Correlation Coefficient

Visa  Netcompany Group

Poor diversification

The 3 months correlation between Visa and Netcompany is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Netcompany Group AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netcompany Group 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 Netcompany Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netcompany Group has no effect on the direction of Visa i.e., Visa and Netcompany Group go up and down completely randomly.

Pair Corralation between Visa and Netcompany Group

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.35 times more return on investment than Netcompany Group. However, Visa Class A is 2.88 times less risky than Netcompany Group. It trades about -0.18 of its potential returns per unit of risk. Netcompany Group AS is currently generating about -0.17 per unit of risk. If you would invest  28,121  in Visa Class A on January 24, 2024 and sell it today you would lose (710.00) from holding Visa Class A or give up 2.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.48%
Values	Daily Returns

Visa Class A  vs.  Netcompany Group AS

Visa Class A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Visa Class A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Visa is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Netcompany Group

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Netcompany Group AS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Netcompany Group may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Visa and Netcompany Group

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

The idea behind Visa Class A and Netcompany Group AS 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.

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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.