Correlation Between Visa and VanEck ETF

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

Diversification Opportunities for Visa and VanEck ETF

0.84

Correlation Coefficient

Visa  VanEck ETF

Very poor diversification

The 3 months correlation between Visa and VanEck is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and VanEck ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck ETF Trust 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 VanEck ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck ETF Trust has no effect on the direction of Visa i.e., Visa and VanEck ETF go up and down completely randomly.

Pair Corralation between Visa and VanEck ETF

Taking into account the 90-day investment horizon Visa Class A is expected to generate 25.87 times more return on investment than VanEck ETF. However, Visa is 25.87 times more volatile than VanEck ETF Trust. It trades about 0.12 of its potential returns per unit of risk. VanEck ETF Trust is currently generating about 0.58 per unit of risk. If you would invest  28,482  in Visa Class A on September 12, 2024 and sell it today you would earn a total of  2,756  from holding Visa Class A or generate 9.68% return on investment over 90 days.

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

Visa Class A  vs.  VanEck ETF Trust

Visa Class A

Risk-Adjusted Performance

9 of 100

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 January 2025.

VanEck ETF Trust

Risk-Adjusted Performance

45 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck ETF Trust are ranked lower than 45 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, VanEck ETF is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Visa and VanEck ETF

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

The idea behind Visa Class A and VanEck ETF Trust 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.