Correlation Between Visa and New Era

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

Diversification Opportunities for Visa and New Era

0.12

Correlation Coefficient

Visa  New Era

Average diversification

The 3 months correlation between Visa and New is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and New Era Helium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Era Helium 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 New Era. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Era Helium has no effect on the direction of Visa i.e., Visa and New Era go up and down completely randomly.

Pair Corralation between Visa and New Era

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.05 times more return on investment than New Era. However, Visa Class A is 19.02 times less risky than New Era. It trades about -0.03 of its potential returns per unit of risk. New Era Helium is currently generating about -0.36 per unit of risk. If you would invest  31,216  in Visa Class A on September 19, 2024 and sell it today you would lose (238.00) from holding Visa Class A or give up 0.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	36.36%
Values	Daily Returns

Visa Class A  vs.  New Era Helium

Visa Class A

Risk-Adjusted Performance

8 of 100

Good

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.

New Era Helium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Era Helium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Visa and New Era

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

The idea behind Visa Class A and New Era Helium 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.