Correlation Between Visa and CVR Energy

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

Diversification Opportunities for Visa and CVR Energy

-0.72

Correlation Coefficient

Visa  CVR Energy

Pay attention - limited upside

The 3 months correlation between Visa and CVR is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and CVR Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVR Energy 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 CVR Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVR Energy has no effect on the direction of Visa i.e., Visa and CVR Energy go up and down completely randomly.

Pair Corralation between Visa and CVR Energy

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.29 times more return on investment than CVR Energy. However, Visa Class A is 3.47 times less risky than CVR Energy. It trades about 0.16 of its potential returns per unit of risk. CVR Energy is currently generating about -0.06 per unit of risk. If you would invest  27,801  in Visa Class A on August 31, 2024 and sell it today you would earn a total of  3,669  from holding Visa Class A or generate 13.2% return on investment over 90 days.

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

Visa Class A  vs.  CVR Energy

Visa Class A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 12 (%) 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.

CVR Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVR Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Visa and CVR Energy

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

The idea behind Visa Class A and CVR Energy 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.