Correlation Between Visa and Antero Resources

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

Diversification Opportunities for Visa and Antero Resources

0.67

Correlation Coefficient

Visa  Antero Resources

Poor diversification

The 3 months correlation between Visa and Antero is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Antero Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Antero Resources 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 Antero Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Antero Resources Corp has no effect on the direction of Visa i.e., Visa and Antero Resources go up and down completely randomly.

Pair Corralation between Visa and Antero Resources

Taking into account the 90-day investment horizon Visa is expected to generate 2.03 times less return on investment than Antero Resources. But when comparing it to its historical volatility, Visa Class A is 2.03 times less risky than Antero Resources. It trades about 0.16 of its potential returns per unit of risk. Antero Resources Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,564  in Antero Resources Corp on September 1, 2024 and sell it today you would earn a total of  705.00  from holding Antero Resources Corp or generate 27.5% 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.  Antero Resources Corp

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.

Antero Resources Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Antero Resources Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Antero Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Antero Resources

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

The idea behind Visa Class A and Antero Resources 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.