Correlation Between Visa and OceanaGold

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

Diversification Opportunities for Visa and OceanaGold

0.5

Correlation Coefficient

Visa  OceanaGold

Very weak diversification

The 3 months correlation between Visa and OceanaGold is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and OceanaGold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OceanaGold 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 OceanaGold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OceanaGold has no effect on the direction of Visa i.e., Visa and OceanaGold go up and down completely randomly.

Pair Corralation between Visa and OceanaGold

Taking into account the 90-day investment horizon Visa is expected to generate 1.52 times less return on investment than OceanaGold. But when comparing it to its historical volatility, Visa Class A is 2.79 times less risky than OceanaGold. It trades about 0.1 of its potential returns per unit of risk. OceanaGold is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  289.00  in OceanaGold on August 31, 2024 and sell it today you would earn a total of  153.00  from holding OceanaGold or generate 52.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.73%
Values	Daily Returns

Visa Class A  vs.  OceanaGold

Visa Class A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 12 (%) 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.

OceanaGold

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in OceanaGold are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, OceanaGold displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and OceanaGold

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

The idea behind Visa Class A and OceanaGold 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 Global Correlations module to find global opportunities by holding instruments from different markets.