Correlation Between Visa and Rubellite Energy

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

Diversification Opportunities for Visa and Rubellite Energy

-0.47

Correlation Coefficient

Visa  Rubellite Energy

Very good diversification

The 3 months correlation between Visa and Rubellite is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Rubellite Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rubellite Energy 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 Rubellite Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rubellite Energy has no effect on the direction of Visa i.e., Visa and Rubellite Energy go up and down completely randomly.

Pair Corralation between Visa and Rubellite Energy

Taking into account the 90-day investment horizon Visa is expected to generate 1.1 times less return on investment than Rubellite Energy. But when comparing it to its historical volatility, Visa Class A is 2.83 times less risky than Rubellite Energy. It trades about 0.08 of its potential returns per unit of risk. Rubellite Energy is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  180.00  in Rubellite Energy on October 7, 2024 and sell it today you would earn a total of  45.00  from holding Rubellite Energy or generate 25.0% return on investment over 90 days.

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

Visa Class A  vs.  Rubellite Energy

Visa Class A

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 16 (%) 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.

Rubellite Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rubellite Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Rubellite Energy is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Visa and Rubellite Energy

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

The idea behind Visa Class A and Rubellite Energy 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.