Correlation Between Visa and Sirona Biochem

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

Diversification Opportunities for Visa and Sirona Biochem

-0.01

Correlation Coefficient

Visa  Sirona Biochem

Good diversification

The 3 months correlation between Visa and Sirona is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Sirona Biochem Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sirona Biochem Corp 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 Sirona Biochem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sirona Biochem Corp has no effect on the direction of Visa i.e., Visa and Sirona Biochem go up and down completely randomly.

Pair Corralation between Visa and Sirona Biochem

Taking into account the 90-day investment horizon Visa is expected to generate 1.9 times less return on investment than Sirona Biochem. But when comparing it to its historical volatility, Visa Class A is 8.07 times less risky than Sirona Biochem. It trades about 0.16 of its potential returns per unit of risk. Sirona Biochem Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  7.00  in Sirona Biochem Corp on September 1, 2024 and sell it today you would lose (0.50) from holding Sirona Biochem Corp or give up 7.14% of portfolio value over 90 days.

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

Visa Class A  vs.  Sirona Biochem Corp

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.

Sirona Biochem Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sirona Biochem Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Sirona Biochem showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Sirona Biochem

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

The idea behind Visa Class A and Sirona Biochem Corp 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.