Correlation Between Visa and VanEck Junior

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

Diversification Opportunities for Visa and VanEck Junior

-0.84

Correlation Coefficient

Visa  VanEck Junior

Pay attention - limited upside

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 Junior Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Junior Gold 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 Junior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Junior Gold has no effect on the direction of Visa i.e., Visa and VanEck Junior go up and down completely randomly.

Pair Corralation between Visa and VanEck Junior

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.46 times more return on investment than VanEck Junior. However, Visa Class A is 2.17 times less risky than VanEck Junior. It trades about 0.07 of its potential returns per unit of risk. VanEck Junior Gold is currently generating about 0.03 per unit of risk. If you would invest  22,734  in Visa Class A on October 23, 2024 and sell it today you would earn a total of  9,228  from holding Visa Class A or generate 40.59% return on investment over 90 days.

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

Visa Class A  vs.  VanEck Junior Gold

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.

VanEck Junior Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Junior Gold has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Etf's basic indicators remain relatively steady which may send shares a bit higher in February 2025. The new chaos may also be a sign of medium-term up-swing for the ETF firm stakeholders.

Pair Trading with Visa and VanEck Junior

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

The idea behind Visa Class A and VanEck Junior Gold 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.