Correlation Between Visa and VanEck Vectors

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

Diversification Opportunities for Visa and VanEck Vectors

-0.33

Correlation Coefficient

Visa  VanEck Vectors

Very good diversification

The 3 months correlation between Visa and VanEck is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and VanEck Vectors ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Vectors ETF 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 Vectors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Vectors ETF has no effect on the direction of Visa i.e., Visa and VanEck Vectors go up and down completely randomly.

Pair Corralation between Visa and VanEck Vectors

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.57 times more return on investment than VanEck Vectors. However, Visa Class A is 1.76 times less risky than VanEck Vectors. It trades about 0.09 of its potential returns per unit of risk. VanEck Vectors ETF is currently generating about -0.01 per unit of risk. If you would invest  20,266  in Visa Class A on September 13, 2024 and sell it today you would earn a total of  11,113  from holding Visa Class A or generate 54.84% return on investment over 90 days.

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

Visa Class A  vs.  VanEck Vectors ETF

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 Vectors ETF

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Vectors ETF are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, VanEck Vectors may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Visa and VanEck Vectors

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

The idea behind Visa Class A and VanEck Vectors ETF 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.