Correlation Between Visa and Digital Aria

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

Diversification Opportunities for Visa and Digital Aria

0.48

Correlation Coefficient

Visa  Digital Aria

Very weak diversification

The 3 months correlation between Visa and Digital is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Digital Aria Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Aria 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 Digital Aria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Aria has no effect on the direction of Visa i.e., Visa and Digital Aria go up and down completely randomly.

Pair Corralation between Visa and Digital Aria

Taking into account the 90-day investment horizon Visa is expected to generate 2.41 times less return on investment than Digital Aria. But when comparing it to its historical volatility, Visa Class A is 4.3 times less risky than Digital Aria. It trades about 0.4 of its potential returns per unit of risk. Digital Aria Co is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  882,000  in Digital Aria Co on August 30, 2024 and sell it today you would earn a total of  242,000  from holding Digital Aria Co or generate 27.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Visa Class A  vs.  Digital Aria Co

Visa Class A

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Digital Aria

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Digital Aria Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Digital Aria sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Digital Aria

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

The idea behind Visa Class A and Digital Aria Co 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.