Correlation Between Visa and Gold Futures

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

Diversification Opportunities for Visa and Gold Futures

0.77

Correlation Coefficient

Visa  Gold Futures

Poor diversification

The 3 months correlation between Visa and Gold is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Gold Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Futures 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 Gold Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Futures has no effect on the direction of Visa i.e., Visa and Gold Futures go up and down completely randomly.

Pair Corralation between Visa and Gold Futures

Taking into account the 90-day investment horizon Visa is expected to generate 1.64 times less return on investment than Gold Futures. In addition to that, Visa is 1.28 times more volatile than Gold Futures. It trades about 0.12 of its total potential returns per unit of risk. Gold Futures is currently generating about 0.24 per unit of volatility. If you would invest  265,390  in Gold Futures on December 26, 2024 and sell it today you would earn a total of  37,230  from holding Gold Futures or generate 14.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.75%
Values	Daily Returns

Visa Class A  vs.  Gold Futures

Visa Class A

Risk-Adjusted Performance

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 April 2025.

Gold Futures

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Futures are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Gold Futures exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Gold Futures

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

The idea behind Visa Class A and Gold Futures 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.