Correlation Between Visa and Super Energy

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

Diversification Opportunities for Visa and Super Energy

0.05

Correlation Coefficient

Visa  Super Energy

Significant diversification

The 3 months correlation between Visa and Super is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Super Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Super 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 Super Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Super Energy has no effect on the direction of Visa i.e., Visa and Super Energy go up and down completely randomly.

Pair Corralation between Visa and Super Energy

Taking into account the 90-day investment horizon Visa is expected to generate 61.16 times less return on investment than Super Energy. But when comparing it to its historical volatility, Visa Class A is 120.29 times less risky than Super Energy. It trades about 0.21 of its potential returns per unit of risk. Super Energy is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  52.00  in Super Energy on October 7, 2024 and sell it today you would lose (27.00) from holding Super Energy or give up 51.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Visa Class A  vs.  Super 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.

Super Energy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Super Energy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Super Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Super Energy

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

The idea behind Visa Class A and Super 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.