Correlation Between Visa and Origin Materials

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

Diversification Opportunities for Visa and Origin Materials

-0.24

Correlation Coefficient

Visa  Origin Materials

Very good diversification

The 3 months correlation between Visa and Origin is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Origin Materials Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Materials Warrant 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 Origin Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Origin Materials Warrant has no effect on the direction of Visa i.e., Visa and Origin Materials go up and down completely randomly.

Pair Corralation between Visa and Origin Materials

Taking into account the 90-day investment horizon Visa is expected to generate 1.12 times less return on investment than Origin Materials. But when comparing it to its historical volatility, Visa Class A is 13.1 times less risky than Origin Materials. It trades about 0.13 of its potential returns per unit of risk. Origin Materials Warrant is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  8.53  in Origin Materials Warrant on December 27, 2024 and sell it today you would lose (3.33) from holding Origin Materials Warrant or give up 39.04% of portfolio value over 90 days.

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

Visa Class A  vs.  Origin Materials Warrant

Visa Class A

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 9 (%) 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 April 2025.

Origin Materials Warrant

Risk-Adjusted Performance

Very Weak

Over the last 90 days Origin Materials Warrant has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal basic indicators, Origin Materials may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Visa and Origin Materials

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

The idea behind Visa Class A and Origin Materials Warrant 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.