Correlation Between Visa and Global Gold

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

Diversification Opportunities for Visa and Global Gold

0.85

Correlation Coefficient

Visa  Global Gold

Very poor diversification

The 3 months correlation between Visa and Global is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Global Gold Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Gold Fund 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 Global Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Gold Fund has no effect on the direction of Visa i.e., Visa and Global Gold go up and down completely randomly.

Pair Corralation between Visa and Global Gold

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.56 times more return on investment than Global Gold. However, Visa Class A is 1.77 times less risky than Global Gold. It trades about 0.41 of its potential returns per unit of risk. Global Gold Fund is currently generating about 0.2 per unit of risk. If you would invest  31,387  in Visa Class A on December 2, 2024 and sell it today you would earn a total of  4,884  from holding Visa Class A or generate 15.56% return on investment over 90 days.

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

Visa Class A  vs.  Global Gold Fund

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 19 (%) 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.

Global Gold Fund

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global Gold Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Global Gold may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Visa and Global Gold

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

The idea behind Visa Class A and Global Gold Fund 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.