Correlation Between Visa and Noble Rock

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

Diversification Opportunities for Visa and Noble Rock

0.83

Correlation Coefficient

Visa  Noble Rock

Very poor diversification

The 3 months correlation between Visa and Noble is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Noble Rock Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Noble Rock Acquisition 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 Noble Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Noble Rock Acquisition has no effect on the direction of Visa i.e., Visa and Noble Rock go up and down completely randomly.

Pair Corralation between Visa and Noble Rock

Taking into account the 90-day investment horizon Visa Class A is expected to generate 4.79 times more return on investment than Noble Rock. However, Visa is 4.79 times more volatile than Noble Rock Acquisition. It trades about 0.08 of its potential returns per unit of risk. Noble Rock Acquisition is currently generating about 0.17 per unit of risk. If you would invest  21,003  in Visa Class A on September 4, 2024 and sell it today you would earn a total of  10,298  from holding Visa Class A or generate 49.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	30.51%
Values	Daily Returns

Visa Class A  vs.  Noble Rock Acquisition

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.

Noble Rock Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Noble Rock Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Noble Rock is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Visa and Noble Rock

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

The idea behind Visa Class A and Noble Rock Acquisition 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.