Correlation Between Visa and Flying Nickel

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

Diversification Opportunities for Visa and Flying Nickel

-0.28

Correlation Coefficient

Visa  Flying Nickel

Very good diversification

The 3 months correlation between Visa and Flying is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Flying Nickel Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flying Nickel Mining 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 Flying Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flying Nickel Mining has no effect on the direction of Visa i.e., Visa and Flying Nickel go up and down completely randomly.

Pair Corralation between Visa and Flying Nickel

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.12 times more return on investment than Flying Nickel. However, Visa Class A is 8.17 times less risky than Flying Nickel. It trades about 0.08 of its potential returns per unit of risk. Flying Nickel Mining is currently generating about 0.0 per unit of risk. If you would invest  21,608  in Visa Class A on October 9, 2024 and sell it today you would earn a total of  9,696  from holding Visa Class A or generate 44.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Visa Class A  vs.  Flying Nickel Mining

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.

Flying Nickel Mining

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Flying Nickel Mining are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Flying Nickel showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Flying Nickel

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

The idea behind Visa Class A and Flying Nickel Mining 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.