Correlation Between Metal Sky and Visa

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

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

Diversification Opportunities for Metal Sky and Visa

0.25

Correlation Coefficient

Metal Sky  Visa

Modest diversification

The 3 months correlation between Metal and Visa is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Metal Sky Star 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 Metal Sky 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 Metal Sky Star 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 Metal Sky i.e., Metal Sky and Visa go up and down completely randomly.

Pair Corralation between Metal Sky and Visa

Given the investment horizon of 90 days Metal Sky is expected to generate 37.16 times less return on investment than Visa. But when comparing it to its historical volatility, Metal Sky Star is 1.2 times less risky than Visa. It trades about 0.01 of its potential returns per unit of risk. Visa Class A is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  34,524  in Visa Class A on December 5, 2024 and sell it today you would earn a total of  1,658  from holding Visa Class A or generate 4.8% return on investment over 90 days.

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

Metal Sky Star  vs.  Visa Class A

Metal Sky Star

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Metal Sky Star are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Metal Sky is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Visa Class A

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 23 (%) 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 Metal Sky and Visa

The main advantage of trading using opposite Metal Sky and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metal Sky 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 Metal Sky Star 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.