Correlation Between Visa and Crown Energy

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

Diversification Opportunities for Visa and Crown Energy

-0.52

Correlation Coefficient

Visa  Crown Energy

Excellent diversification

The 3 months correlation between Visa and Crown is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Crown Energy AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Energy AB 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 Crown Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown Energy AB has no effect on the direction of Visa i.e., Visa and Crown Energy go up and down completely randomly.

Pair Corralation between Visa and Crown Energy

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.05 times more return on investment than Crown Energy. However, Visa Class A is 21.58 times less risky than Crown Energy. It trades about 0.08 of its potential returns per unit of risk. Crown Energy AB is currently generating about 0.0 per unit of risk. If you would invest  30,830  in Visa Class A on October 10, 2024 and sell it today you would earn a total of  430.00  from holding Visa Class A or generate 1.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	85.71%
Values	Daily Returns

Visa Class A  vs.  Crown Energy AB

Visa Class A

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 14 (%) 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 February 2025.

Crown Energy AB

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Crown Energy AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Crown Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Crown Energy

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

The idea behind Visa Class A and Crown Energy AB 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.