Correlation Between Visa and Santos

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

Diversification Opportunities for Visa and Santos

0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between Visa and Santos is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Santos Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santos Ltd ADR 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 Santos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santos Ltd ADR has no effect on the direction of Visa i.e., Visa and Santos go up and down completely randomly.

Pair Corralation between Visa and Santos

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.66 times more return on investment than Santos. However, Visa Class A is 1.51 times less risky than Santos. It trades about 0.05 of its potential returns per unit of risk. Santos Ltd ADR is currently generating about -0.01 per unit of risk. If you would invest  21,141  in Visa Class A on December 30, 2023 and sell it today you would earn a total of  6,767  from holding Visa Class A or generate 32.01% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy96.96%
ValuesDaily Returns

Visa Class A  vs.  Santos Ltd ADR

 Performance 
       Timeline  
Visa Class A 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
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 April 2024.
Santos Ltd ADR 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Santos Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Visa and Santos Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Visa and Santos

The main advantage of trading using opposite Visa and Santos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Santos 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 Santos will offset losses from the drop in Santos' long position.
The idea behind Visa Class A and Santos Ltd ADR 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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