Correlation Between Visa and Novelis

Can any of the company-specific risk be diversified away by investing in both Visa and Novelis 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 Novelis 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 Novelis Corp 475, you can compare the effects of market volatilities on Visa and Novelis 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 Novelis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Novelis.

Diversification Opportunities for Visa and Novelis

-0.45

Correlation Coefficient

Visa  Novelis

Very good diversification

The 3 months correlation between Visa and Novelis is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Novelis Corp 475 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novelis Corp 475 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 Novelis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novelis Corp 475 has no effect on the direction of Visa i.e., Visa and Novelis go up and down completely randomly.

Pair Corralation between Visa and Novelis

Taking into account the 90-day investment horizon Visa is expected to generate 1.69 times less return on investment than Novelis. In addition to that, Visa is 1.96 times more volatile than Novelis Corp 475. It trades about 0.09 of its total potential returns per unit of risk. Novelis Corp 475 is currently generating about 0.31 per unit of volatility. If you would invest  9,145  in Novelis Corp 475 on October 20, 2024 and sell it today you would earn a total of  255.00  from holding Novelis Corp 475 or generate 2.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Visa Class A  vs.  Novelis Corp 475

Visa Class A

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 13 (%) 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 February 2025.

Novelis Corp 475

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novelis Corp 475 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Novelis 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 Novelis

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

The idea behind Visa Class A and Novelis Corp 475 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.