Correlation Between Visa and ARK 21Shares

Can any of the company-specific risk be diversified away by investing in both Visa and ARK 21Shares 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 ARK 21Shares 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 ARK 21Shares Active, you can compare the effects of market volatilities on Visa and ARK 21Shares 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 ARK 21Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and ARK 21Shares.

Diversification Opportunities for Visa and ARK 21Shares

-0.4

Correlation Coefficient

Visa  ARK 21Shares

Very good diversification

The 3 months correlation between Visa and ARK is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and ARK 21Shares Active in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARK 21Shares Active 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 ARK 21Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARK 21Shares Active has no effect on the direction of Visa i.e., Visa and ARK 21Shares go up and down completely randomly.

Pair Corralation between Visa and ARK 21Shares

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.32 times more return on investment than ARK 21Shares. However, Visa Class A is 3.12 times less risky than ARK 21Shares. It trades about 0.25 of its potential returns per unit of risk. ARK 21Shares Active is currently generating about -0.07 per unit of risk. If you would invest  31,612  in Visa Class A on December 1, 2024 and sell it today you would earn a total of  4,659  from holding Visa Class A or generate 14.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Visa Class A  vs.  ARK 21Shares Active

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.

ARK 21Shares Active

Risk-Adjusted Performance

Very Weak

Over the last 90 days ARK 21Shares Active has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Etf's forward-looking signals remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with Visa and ARK 21Shares

The main advantage of trading using opposite Visa and ARK 21Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, ARK 21Shares 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 ARK 21Shares will offset losses from the drop in ARK 21Shares' long position.

The idea behind Visa Class A and ARK 21Shares Active 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.