Correlation Between Visa and Antero Midstream

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

Diversification Opportunities for Visa and Antero Midstream

0.45

Correlation Coefficient

Visa  Antero Midstream

Very weak diversification

The 3 months correlation between Visa and Antero is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Antero Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Antero Midstream Partners 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 Antero Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Antero Midstream Partners has no effect on the direction of Visa i.e., Visa and Antero Midstream go up and down completely randomly.

Pair Corralation between Visa and Antero Midstream

Taking into account the 90-day investment horizon Visa Class A is expected to under-perform the Antero Midstream. But the stock apears to be less risky and, when comparing its historical volatility, Visa Class A is 1.14 times less risky than Antero Midstream. The stock trades about -0.38 of its potential returns per unit of risk. The Antero Midstream Partners is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,369  in Antero Midstream Partners on January 20, 2024 and sell it today you would earn a total of  13.00  from holding Antero Midstream Partners or generate 0.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Visa Class A  vs.  Antero Midstream Partners

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.

Antero Midstream Partners

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Antero Midstream Partners are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady primary indicators, Antero Midstream displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Antero Midstream

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

The idea behind Visa Class A and Antero Midstream Partners 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 Transaction History module to view history of all your transactions and understand their impact on performance.