Correlation Between Visa and Oil Refineries

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

Diversification Opportunities for Visa and Oil Refineries

0.36

Correlation Coefficient

Visa  Oil Refineries

Weak diversification

The 3 months correlation between Visa and Oil is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Oil Refineries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil Refineries 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 Oil Refineries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil Refineries has no effect on the direction of Visa i.e., Visa and Oil Refineries go up and down completely randomly.

Pair Corralation between Visa and Oil Refineries

Taking into account the 90-day investment horizon Visa Class A is expected to under-perform the Oil Refineries. But the stock apears to be less risky and, when comparing its historical volatility, Visa Class A is 2.25 times less risky than Oil Refineries. The stock trades about -0.02 of its potential returns per unit of risk. The Oil Refineries is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  9,370  in Oil Refineries on October 12, 2024 and sell it today you would earn a total of  50.00  from holding Oil Refineries or generate 0.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	85.0%
Values	Daily Returns

Visa Class A  vs.  Oil Refineries

Visa Class A

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 13 (%) 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 February 2025.

Oil Refineries

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Refineries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Oil Refineries is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and Oil Refineries

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

The idea behind Visa Class A and Oil Refineries 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.