Correlation Between Visa and Pandora A/S

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

Diversification Opportunities for Visa and Pandora A/S

0.55

Correlation Coefficient

Visa  Pandora A/S

Very weak diversification

The 3 months correlation between Visa and Pandora is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Pandora AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pandora A/S 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 Pandora A/S. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pandora A/S has no effect on the direction of Visa i.e., Visa and Pandora A/S go up and down completely randomly.

Pair Corralation between Visa and Pandora A/S

Taking into account the 90-day investment horizon Visa is expected to generate 1.06 times less return on investment than Pandora A/S. But when comparing it to its historical volatility, Visa Class A is 1.52 times less risky than Pandora A/S. It trades about 0.12 of its potential returns per unit of risk. Pandora AS is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  15,265  in Pandora AS on September 23, 2024 and sell it today you would earn a total of  1,585  from holding Pandora AS or generate 10.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.48%
Values	Daily Returns

Visa Class A  vs.  Pandora AS

Visa Class A

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 9 (%) 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.

Pandora A/S

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pandora AS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pandora A/S may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Visa and Pandora A/S

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

The idea behind Visa Class A and Pandora 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.