Correlation Between Visa and Fastned BV

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

Diversification Opportunities for Visa and Fastned BV

0.26

Correlation Coefficient

Visa  Fastned BV

Modest diversification

The 3 months correlation between Visa and Fastned is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Fastned BV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastned BV 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 Fastned BV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fastned BV has no effect on the direction of Visa i.e., Visa and Fastned BV go up and down completely randomly.

Pair Corralation between Visa and Fastned BV

Taking into account the 90-day investment horizon Visa is expected to generate 1.51 times less return on investment than Fastned BV. But when comparing it to its historical volatility, Visa Class A is 1.99 times less risky than Fastned BV. It trades about 0.15 of its potential returns per unit of risk. Fastned BV is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,830  in Fastned BV on September 20, 2024 and sell it today you would earn a total of  320.00  from holding Fastned BV or generate 17.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Visa Class A  vs.  Fastned BV

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.

Fastned BV

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fastned BV are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Fastned BV unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Fastned BV

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

The idea behind Visa Class A and Fastned BV 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.