Correlation Between Visa and DNB Financial

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

Diversification Opportunities for Visa and DNB Financial

0.0

Correlation Coefficient

Visa  DNB Financial

Pay attention - limited upside

The 3 months correlation between Visa and DNB is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and DNB Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DNB Financial 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 DNB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DNB Financial has no effect on the direction of Visa i.e., Visa and DNB Financial go up and down completely randomly.

Pair Corralation between Visa and DNB Financial

If you would invest (100.00) in DNB Financial on February 3, 2024 and sell it today you would earn a total of  100.00  from holding DNB Financial or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Visa Class A  vs.  DNB Financial

Visa Class A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Visa Class A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Visa is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

DNB Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DNB Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, DNB Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Visa and DNB Financial

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

The idea behind Visa Class A and DNB Financial 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.