Correlation Between Visa and Mercury NZ

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

Diversification Opportunities for Visa and Mercury NZ

-0.46

Correlation Coefficient

Visa  Mercury NZ

Very good diversification

The 3 months correlation between Visa and Mercury is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Mercury NZ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercury NZ 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 Mercury NZ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercury NZ has no effect on the direction of Visa i.e., Visa and Mercury NZ go up and down completely randomly.

Pair Corralation between Visa and Mercury NZ

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.27 times more return on investment than Mercury NZ. However, Visa Class A is 3.7 times less risky than Mercury NZ. It trades about 0.09 of its potential returns per unit of risk. Mercury NZ is currently generating about -0.17 per unit of risk. If you would invest  30,830  in Visa Class A on October 9, 2024 and sell it today you would earn a total of  474.00  from holding Visa Class A or generate 1.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Visa Class A  vs.  Mercury NZ

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.

Mercury NZ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mercury NZ has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Visa and Mercury NZ

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

The idea behind Visa Class A and Mercury NZ 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.