Correlation Between Visa and APACHE

Can any of the company-specific risk be diversified away by investing in both Visa and APACHE 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 APACHE 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 APACHE P 6, you can compare the effects of market volatilities on Visa and APACHE 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 APACHE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and APACHE.

Diversification Opportunities for Visa and APACHE

-0.47

Correlation Coefficient

Visa  APACHE

Very good diversification

The 3 months correlation between Visa and APACHE is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and APACHE P 6 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APACHE P 6 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 APACHE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APACHE P 6 has no effect on the direction of Visa i.e., Visa and APACHE go up and down completely randomly.

Pair Corralation between Visa and APACHE

Taking into account the 90-day investment horizon Visa is expected to generate 27.67 times less return on investment than APACHE. But when comparing it to its historical volatility, Visa Class A is 50.78 times less risky than APACHE. It trades about 0.09 of its potential returns per unit of risk. APACHE P 6 is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  9,250  in APACHE P 6 on September 17, 2024 and sell it today you would earn a total of  1,121  from holding APACHE P 6 or generate 12.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	83.99%
Values	Daily Returns

Visa Class A  vs.  APACHE P 6

Visa Class A

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

APACHE P 6

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days APACHE P 6 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, APACHE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and APACHE

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

The idea behind Visa Class A and APACHE P 6 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.