Correlation Between Visa and Power Metals

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

Diversification Opportunities for Visa and Power Metals

0.17

Correlation Coefficient

Visa  Power Metals

Average diversification

The 3 months correlation between Visa and Power is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Power Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Metals Corp 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 Power Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Metals Corp has no effect on the direction of Visa i.e., Visa and Power Metals go up and down completely randomly.

Pair Corralation between Visa and Power Metals

Taking into account the 90-day investment horizon Visa Class A is expected to under-perform the Power Metals. But the stock apears to be less risky and, when comparing its historical volatility, Visa Class A is 2.84 times less risky than Power Metals. The stock trades about -0.02 of its potential returns per unit of risk. The Power Metals Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  31.00  in Power Metals Corp on October 12, 2024 and sell it today you would earn a total of  1.00  from holding Power Metals Corp or generate 3.23% return on investment over 90 days.

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

Visa Class A  vs.  Power Metals Corp

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.

Power Metals Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Power Metals Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Power Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Power Metals

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

The idea behind Visa Class A and Power Metals Corp 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.