Correlation Between Visa and Big Ridge

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

Diversification Opportunities for Visa and Big Ridge

-0.09

Correlation Coefficient

Visa  Big Ridge

Good diversification

The 3 months correlation between Visa and Big is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Big Ridge Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Ridge Gold 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 Big Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Ridge Gold has no effect on the direction of Visa i.e., Visa and Big Ridge go up and down completely randomly.

Pair Corralation between Visa and Big Ridge

Taking into account the 90-day investment horizon Visa is expected to generate 3.81 times less return on investment than Big Ridge. But when comparing it to its historical volatility, Visa Class A is 6.45 times less risky than Big Ridge. It trades about 0.15 of its potential returns per unit of risk. Big Ridge Gold is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  6.00  in Big Ridge Gold on September 21, 2024 and sell it today you would earn a total of  3.00  from holding Big Ridge Gold or generate 50.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.13%
Values	Daily Returns

Visa Class A  vs.  Big Ridge Gold

Visa Class A

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Big Ridge Gold

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Big Ridge Gold are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Big Ridge may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Visa and Big Ridge

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

The idea behind Visa Class A and Big Ridge Gold 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.