Correlation Between Visa and Swiss Re

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

Diversification Opportunities for Visa and Swiss Re

0.63

Correlation Coefficient

Visa  Swiss Re

Poor diversification

The 3 months correlation between Visa and Swiss is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Swiss Re in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swiss Re 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 Swiss Re. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swiss Re has no effect on the direction of Visa i.e., Visa and Swiss Re go up and down completely randomly.

Pair Corralation between Visa and Swiss Re

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.76 times more return on investment than Swiss Re. However, Visa Class A is 1.32 times less risky than Swiss Re. It trades about 0.15 of its potential returns per unit of risk. Swiss Re is currently generating about 0.09 per unit of risk. If you would invest  28,469  in Visa Class A on September 19, 2024 and sell it today you would earn a total of  3,361  from holding Visa Class A or generate 11.81% return on investment over 90 days.

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

Visa Class A  vs.  Swiss Re

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.

Swiss Re

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Swiss Re are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Swiss Re may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Visa and Swiss Re

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

The idea behind Visa Class A and Swiss Re 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.