Correlation Between Visa and Chesapeake Gold

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

Diversification Opportunities for Visa and Chesapeake Gold

-0.65

Correlation Coefficient

Visa  Chesapeake Gold

Excellent diversification

The 3 months correlation between Visa and Chesapeake is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Chesapeake Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Gold 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 Chesapeake Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesapeake Gold Corp has no effect on the direction of Visa i.e., Visa and Chesapeake Gold go up and down completely randomly.

Pair Corralation between Visa and Chesapeake Gold

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.17 times more return on investment than Chesapeake Gold. However, Visa Class A is 5.89 times less risky than Chesapeake Gold. It trades about 0.09 of its potential returns per unit of risk. Chesapeake Gold Corp is currently generating about 0.01 per unit of risk. If you would invest  30,830  in Visa Class A on October 9, 2024 and sell it today you would earn a total of  474.00  from holding Visa Class A or generate 1.54% return on investment over 90 days.

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

Visa Class A  vs.  Chesapeake Gold Corp

Visa Class A

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 15 (%) 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.

Chesapeake Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chesapeake Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Visa and Chesapeake Gold

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

The idea behind Visa Class A and Chesapeake Gold 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.