Correlation Between Visa and The Gold

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

Diversification Opportunities for Visa and The Gold

0.76

Correlation Coefficient

Visa  The Gold

Poor diversification

The 3 months correlation between Visa and The is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and The Gold Bullion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Bullion 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 The Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Bullion has no effect on the direction of Visa i.e., Visa and The Gold go up and down completely randomly.

Pair Corralation between Visa and The Gold

Taking into account the 90-day investment horizon Visa is expected to generate 1.68 times less return on investment than The Gold. In addition to that, Visa is 1.25 times more volatile than The Gold Bullion. It trades about 0.12 of its total potential returns per unit of risk. The Gold Bullion is currently generating about 0.24 per unit of volatility. If you would invest  2,004  in The Gold Bullion on December 26, 2024 and sell it today you would earn a total of  269.00  from holding The Gold Bullion or generate 13.42% return on investment over 90 days.

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

Visa Class A  vs.  The Gold Bullion

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.

Gold Bullion

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Gold Bullion are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, The Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and The Gold

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

The idea behind Visa Class A and The Gold Bullion 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .