Correlation Between Visa and Arcadia Minerals

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

Diversification Opportunities for Visa and Arcadia Minerals

0.06

Correlation Coefficient

Visa  Arcadia Minerals

Significant diversification

The 3 months correlation between Visa and Arcadia is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Arcadia Minerals Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcadia Minerals 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 Arcadia Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcadia Minerals has no effect on the direction of Visa i.e., Visa and Arcadia Minerals go up and down completely randomly.

Pair Corralation between Visa and Arcadia Minerals

Taking into account the 90-day investment horizon Visa is expected to generate 1.07 times less return on investment than Arcadia Minerals. But when comparing it to its historical volatility, Visa Class A is 3.25 times less risky than Arcadia Minerals. It trades about 0.13 of its potential returns per unit of risk. Arcadia Minerals Ltd is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1.90  in Arcadia Minerals Ltd on December 27, 2024 and sell it today you would earn a total of  0.10  from holding Arcadia Minerals Ltd or generate 5.26% return on investment over 90 days.

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

Visa Class A  vs.  Arcadia Minerals Ltd

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.

Arcadia Minerals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arcadia Minerals Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Arcadia Minerals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Visa and Arcadia Minerals

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

The idea behind Visa Class A and Arcadia Minerals Ltd 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.