Correlation Between Visa and Bullion Gold

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

Diversification Opportunities for Visa and Bullion Gold

0.14

Correlation Coefficient

Visa  Bullion Gold

Average diversification

The 3 months correlation between Visa and Bullion is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Bullion Gold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bullion Gold Resources 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 Bullion Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bullion Gold Resources has no effect on the direction of Visa i.e., Visa and Bullion Gold go up and down completely randomly.

Pair Corralation between Visa and Bullion Gold

Taking into account the 90-day investment horizon Visa is expected to generate 2.38 times less return on investment than Bullion Gold. But when comparing it to its historical volatility, Visa Class A is 2.38 times less risky than Bullion Gold. It trades about 0.12 of its potential returns per unit of risk. Bullion Gold Resources is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1.48  in Bullion Gold Resources on September 12, 2024 and sell it today you would earn a total of  0.36  from holding Bullion Gold Resources or generate 24.32% 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.  Bullion Gold Resources

Visa Class A

Risk-Adjusted Performance

9 of 100

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 January 2025.

Bullion Gold Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bullion Gold Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bullion Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Bullion Gold

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

The idea behind Visa Class A and Bullion Gold Resources 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.