Correlation Between Visa and Barrick Gold

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

Diversification Opportunities for Visa and Barrick Gold

0.6

Correlation Coefficient

Visa  Barrick Gold

Poor diversification

The 3 months correlation between Visa and Barrick is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Barrick Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barrick Gold 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 Barrick Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barrick Gold Corp has no effect on the direction of Visa i.e., Visa and Barrick Gold go up and down completely randomly.

Pair Corralation between Visa and Barrick Gold

Taking into account the 90-day investment horizon Visa is expected to generate 1.81 times less return on investment than Barrick Gold. But when comparing it to its historical volatility, Visa Class A is 2.82 times less risky than Barrick Gold. It trades about 0.35 of its potential returns per unit of risk. Barrick Gold Corp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,298  in Barrick Gold Corp on November 29, 2024 and sell it today you would earn a total of  269.00  from holding Barrick Gold Corp or generate 11.71% return on investment over 90 days.

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

Visa Class A  vs.  Barrick Gold Corp

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 18 (%) 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.

Barrick Gold Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Barrick Gold Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Barrick Gold is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Visa and Barrick Gold

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

The idea behind Visa Class A and Barrick Gold 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.

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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.