Correlation Between Visa and Blockchain Group

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

Diversification Opportunities for Visa and Blockchain Group

0.87

Correlation Coefficient

Visa  Blockchain Group

Very poor diversification

The 3 months correlation between Visa and Blockchain is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Blockchain Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blockchain 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 Blockchain Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blockchain Group has no effect on the direction of Visa i.e., Visa and Blockchain Group go up and down completely randomly.

Pair Corralation between Visa and Blockchain Group

Taking into account the 90-day investment horizon Visa is expected to generate 6.21 times less return on investment than Blockchain Group. But when comparing it to its historical volatility, Visa Class A is 6.43 times less risky than Blockchain Group. It trades about 0.16 of its potential returns per unit of risk. Blockchain Group SA is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Blockchain Group SA on September 2, 2024 and sell it today you would earn a total of  13.00  from holding Blockchain Group SA or generate 86.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.97%
Values	Daily Returns

Visa Class A  vs.  Blockchain Group SA

Visa Class A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 12 (%) 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.

Blockchain Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blockchain Group SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Blockchain Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Blockchain Group

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

The idea behind Visa Class A and Blockchain Group SA 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.