Correlation Between Visa and IRONBARK ZINC

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

Diversification Opportunities for Visa and IRONBARK ZINC

-0.28

Correlation Coefficient

Visa  IRONBARK ZINC

Very good diversification

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

Pair Corralation between Visa and IRONBARK ZINC

Taking into account the 90-day investment horizon Visa is expected to generate 6.18 times less return on investment than IRONBARK ZINC. But when comparing it to its historical volatility, Visa Class A is 14.24 times less risky than IRONBARK ZINC. It trades about 0.09 of its potential returns per unit of risk. IRONBARK ZINC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.35  in IRONBARK ZINC on September 30, 2024 and sell it today you would lose (0.25) from holding IRONBARK ZINC or give up 71.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Visa Class A  vs.  IRONBARK ZINC

Visa Class A

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 17 (%) 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.

IRONBARK ZINC

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days IRONBARK ZINC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather uncertain basic indicators, IRONBARK ZINC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and IRONBARK ZINC

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

The idea behind Visa Class A and IRONBARK ZINC 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.