Correlation Between Visa and Oakmark Select

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

Diversification Opportunities for Visa and Oakmark Select

0.92

Correlation Coefficient

Visa  Oakmark Select

Almost no diversification

The 3 months correlation between Visa and Oakmark is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Oakmark Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oakmark Select 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 Oakmark Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oakmark Select has no effect on the direction of Visa i.e., Visa and Oakmark Select go up and down completely randomly.

Pair Corralation between Visa and Oakmark Select

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.16 times more return on investment than Oakmark Select. However, Visa is 1.16 times more volatile than Oakmark Select. It trades about 0.09 of its potential returns per unit of risk. Oakmark Select is currently generating about 0.06 per unit of risk. If you would invest  25,690  in Visa Class A on September 25, 2024 and sell it today you would earn a total of  6,032  from holding Visa Class A or generate 23.48% return on investment over 90 days.

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

Visa Class A  vs.  Oakmark Select

Visa Class A

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 19 (%) 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.

Oakmark Select

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oakmark Select are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Oakmark Select may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Visa and Oakmark Select

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

The idea behind Visa Class A and Oakmark Select 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.