Correlation Between Visa and Arbor Metals

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

Diversification Opportunities for Visa and Arbor Metals

0.31

Correlation Coefficient

Visa  Arbor Metals

Weak diversification

The 3 months correlation between Visa and Arbor is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Arbor Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbor Metals Corp 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 Arbor Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbor Metals Corp has no effect on the direction of Visa i.e., Visa and Arbor Metals go up and down completely randomly.

Pair Corralation between Visa and Arbor Metals

Taking into account the 90-day investment horizon Visa is expected to generate 231.24 times less return on investment than Arbor Metals. But when comparing it to its historical volatility, Visa Class A is 152.23 times less risky than Arbor Metals. It trades about 0.13 of its potential returns per unit of risk. Arbor Metals Corp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  4.50  in Arbor Metals Corp on December 27, 2024 and sell it today you would lose (0.80) from holding Arbor Metals Corp or give up 17.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Visa Class A  vs.  Arbor Metals Corp

Visa Class A

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Arbor Metals Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arbor Metals Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Arbor Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Arbor Metals

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

The idea behind Visa Class A and Arbor Metals Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.