Correlation Between Visa and ONCOR

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

Diversification Opportunities for Visa and ONCOR

0.3

Correlation Coefficient

Visa  ONCOR

Weak diversification

The 3 months correlation between Visa and ONCOR is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and ONCOR ELEC DELIVERY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ONCOR ELEC DELIVERY 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 ONCOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ONCOR ELEC DELIVERY has no effect on the direction of Visa i.e., Visa and ONCOR go up and down completely randomly.

Pair Corralation between Visa and ONCOR

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.47 times more return on investment than ONCOR. However, Visa is 1.47 times more volatile than ONCOR ELEC DELIVERY. It trades about 0.13 of its potential returns per unit of risk. ONCOR ELEC DELIVERY is currently generating about 0.03 per unit of risk. If you would invest  31,478  in Visa Class A on December 29, 2024 and sell it today you would earn a total of  2,807  from holding Visa Class A or generate 8.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.16%
Values	Daily Returns

Visa Class A  vs.  ONCOR ELEC DELIVERY

Visa Class A

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 10 (%) 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 April 2025.

ONCOR ELEC DELIVERY

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ONCOR ELEC DELIVERY are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ONCOR 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 ONCOR

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

The idea behind Visa Class A and ONCOR ELEC DELIVERY 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.