Correlation Between Visa and BHP Group
Can any of the company-specific risk be diversified away by investing in both Visa and BHP Group 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 BHP Group 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 BHP Group Limited, you can compare the effects of market volatilities on Visa and BHP Group 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 BHP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and BHP Group.
Diversification Opportunities for Visa and BHP Group
Very good diversification
The 3 months correlation between Visa and BHP is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and BHP Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP Group Limited 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 BHP Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHP Group Limited has no effect on the direction of Visa i.e., Visa and BHP Group go up and down completely randomly.
Pair Corralation between Visa and BHP Group
Taking into account the 90-day investment horizon Visa Class A is expected to under-perform the BHP Group. But the stock apears to be less risky and, when comparing its historical volatility, Visa Class A is 2.77 times less risky than BHP Group. The stock trades about -0.22 of its potential returns per unit of risk. The BHP Group Limited is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 5,766 in BHP Group Limited on February 5, 2024 and sell it today you would lose (140.00) from holding BHP Group Limited or give up 2.43% 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. BHP Group Limited
Performance |
| Timeline |
| Visa Class A |
| BHP Group Limited |
Visa and BHP Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and BHP Group
The main advantage of trading using opposite Visa and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, BHP Group 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 BHP Group will offset losses from the drop in BHP Group's long position.| Visa vs. American Express | Visa vs. Upstart HoldingsInc | Visa vs. Capital One Financial | Visa vs. Ally Financial |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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