Correlation Between Visa and Metal Sky

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

Diversification Opportunities for Visa and Metal Sky

0.74

Correlation Coefficient

Visa  Metal Sky

Poor diversification

The 3 months correlation between Visa and Metal is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Metal Sky Star in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metal Sky Star 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 Metal Sky. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metal Sky Star has no effect on the direction of Visa i.e., Visa and Metal Sky go up and down completely randomly.

Pair Corralation between Visa and Metal Sky

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.7 times more return on investment than Metal Sky. However, Visa is 1.7 times more volatile than Metal Sky Star. It trades about 0.09 of its potential returns per unit of risk. Metal Sky Star is currently generating about 0.05 per unit of risk. If you would invest  20,485  in Visa Class A on September 19, 2024 and sell it today you would earn a total of  10,493  from holding Visa Class A or generate 51.22% return on investment over 90 days.

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

Visa Class A  vs.  Metal Sky Star

Visa Class A

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) 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.

Metal Sky Star

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Metal Sky Star are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Metal Sky is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and Metal Sky

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

The idea behind Visa Class A and Metal Sky Star 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.