Correlation Between Visa and KLX Energy

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

Diversification Opportunities for Visa and KLX Energy

0.18

Correlation Coefficient

Visa  KLX Energy

Average diversification

The 3 months correlation between Visa and KLX is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and KLX Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLX Energy Services 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 KLX Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLX Energy Services has no effect on the direction of Visa i.e., Visa and KLX Energy go up and down completely randomly.

Pair Corralation between Visa and KLX Energy

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.24 times more return on investment than KLX Energy. However, Visa Class A is 4.22 times less risky than KLX Energy. It trades about 0.1 of its potential returns per unit of risk. KLX Energy Services is currently generating about -0.01 per unit of risk. If you would invest  21,908  in Visa Class A on September 19, 2024 and sell it today you would earn a total of  9,922  from holding Visa Class A or generate 45.29% return on investment over 90 days.

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

Visa Class A  vs.  KLX Energy Services

Visa Class A

Risk-Adjusted Performance

11 of 100

OK

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 inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

KLX Energy Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KLX Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Visa and KLX Energy

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

The idea behind Visa Class A and KLX Energy Services 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.