Correlation Between Visa and Mineral Res

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

Diversification Opportunities for Visa and Mineral Res

-0.25

Correlation Coefficient

Visa  Mineral Res

Very good diversification

The 3 months correlation between Visa and Mineral is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Mineral Res in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mineral Res 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 Mineral Res. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mineral Res has no effect on the direction of Visa i.e., Visa and Mineral Res go up and down completely randomly.

Pair Corralation between Visa and Mineral Res

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.27 times more return on investment than Mineral Res. However, Visa Class A is 3.67 times less risky than Mineral Res. It trades about -0.14 of its potential returns per unit of risk. Mineral Res is currently generating about -0.47 per unit of risk. If you would invest  27,595  in Visa Class A on March 19, 2024 and sell it today you would lose (529.00) from holding Visa Class A or give up 1.92% 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.  Mineral Res

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 latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Mineral Res

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mineral Res has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Mineral Res is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and Mineral Res

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

The idea behind Visa Class A and Mineral Res 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.