Correlation Between Visa and Nordea 1

Can any of the company-specific risk be diversified away by investing in both Visa and Nordea 1 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 Nordea 1 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 Nordea 1 , you can compare the effects of market volatilities on Visa and Nordea 1 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 Nordea 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Nordea 1.

Diversification Opportunities for Visa and Nordea 1

0.83

Correlation Coefficient

Visa  Nordea 1

Very poor diversification

The 3 months correlation between Visa and Nordea is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Nordea 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordea 1 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 Nordea 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordea 1 has no effect on the direction of Visa i.e., Visa and Nordea 1 go up and down completely randomly.

Pair Corralation between Visa and Nordea 1

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.25 times more return on investment than Nordea 1. However, Visa is 1.25 times more volatile than Nordea 1 . It trades about 0.09 of its potential returns per unit of risk. Nordea 1 is currently generating about 0.08 per unit of risk. If you would invest  20,456  in Visa Class A on September 20, 2024 and sell it today you would earn a total of  11,374  from holding Visa Class A or generate 55.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Visa Class A  vs.  Nordea 1

Visa Class A

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Nordea 1

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nordea 1 are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly inconsistent basic indicators, Nordea 1 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Visa and Nordea 1

The main advantage of trading using opposite Visa and Nordea 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Nordea 1 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 Nordea 1 will offset losses from the drop in Nordea 1's long position.

The idea behind Visa Class A and Nordea 1 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.