Correlation Between Visa and Outokumpu Oyj

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

Diversification Opportunities for Visa and Outokumpu Oyj

-0.6

Correlation Coefficient

Visa  Outokumpu Oyj

Excellent diversification

The 3 months correlation between Visa and Outokumpu is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Outokumpu Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Outokumpu Oyj 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 Outokumpu Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Outokumpu Oyj has no effect on the direction of Visa i.e., Visa and Outokumpu Oyj go up and down completely randomly.

Pair Corralation between Visa and Outokumpu Oyj

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.88 times more return on investment than Outokumpu Oyj. However, Visa Class A is 1.14 times less risky than Outokumpu Oyj. It trades about 0.11 of its potential returns per unit of risk. Outokumpu Oyj is currently generating about 0.05 per unit of risk. If you would invest  28,992  in Visa Class A on September 14, 2024 and sell it today you would earn a total of  2,482  from holding Visa Class A or generate 8.56% return on investment over 90 days.

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

Visa Class A  vs.  Outokumpu Oyj

Visa Class A

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Outokumpu Oyj

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Outokumpu Oyj are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Outokumpu Oyj is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Visa and Outokumpu Oyj

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

The idea behind Visa Class A and Outokumpu Oyj 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.