Correlation Between Sprott Focus and Visa

Can any of the company-specific risk be diversified away by investing in both Sprott Focus and Visa 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 Sprott Focus and Visa into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sprott Focus Trust and Visa Class A, you can compare the effects of market volatilities on Sprott Focus and Visa 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 Sprott Focus with a short position of Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Focus and Visa.

Diversification Opportunities for Sprott Focus and Visa

0.37

Correlation Coefficient

Sprott Focus  Visa

Weak diversification

The 3 months correlation between Sprott and Visa is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Focus Trust and Visa Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Class A and Sprott Focus 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 Sprott Focus Trust are associated (or correlated) with Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Class A has no effect on the direction of Sprott Focus i.e., Sprott Focus and Visa go up and down completely randomly.

Pair Corralation between Sprott Focus and Visa

Given the investment horizon of 90 days Sprott Focus Trust is expected to under-perform the Visa. But the stock apears to be less risky and, when comparing its historical volatility, Sprott Focus Trust is 1.18 times less risky than Visa. The stock trades about -0.54 of its potential returns per unit of risk. The Visa Class A is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  31,665  in Visa Class A on October 1, 2024 and sell it today you would earn a total of  201.00  from holding Visa Class A or generate 0.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Sprott Focus Trust  vs.  Visa Class A

Sprott Focus Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sprott Focus Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Sprott Focus is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Visa Class A

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sprott Focus and Visa

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

The idea behind Sprott Focus Trust and Visa Class A 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.