Correlation Between Visa and Ivy Natural

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

Diversification Opportunities for Visa and Ivy Natural

0.22

Correlation Coefficient

Visa  Ivy Natural

Modest diversification

The 3 months correlation between Visa and Ivy is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Ivy Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivy Natural Resources 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 Ivy Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ivy Natural Resources has no effect on the direction of Visa i.e., Visa and Ivy Natural go up and down completely randomly.

Pair Corralation between Visa and Ivy Natural

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.42 times more return on investment than Ivy Natural. However, Visa is 1.42 times more volatile than Ivy Natural Resources. It trades about 0.15 of its potential returns per unit of risk. Ivy Natural Resources is currently generating about 0.15 per unit of risk. If you would invest  27,809  in Visa Class A on September 5, 2024 and sell it today you would earn a total of  3,492  from holding Visa Class A or generate 12.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Visa Class A  vs.  Ivy Natural Resources

Visa Class A

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 11 (%) 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.

Ivy Natural Resources

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ivy Natural Resources are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ivy Natural may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Visa and Ivy Natural

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

The idea behind Visa Class A and Ivy Natural Resources 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.