Correlation Between Visa and Vulcan Energy

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

Diversification Opportunities for Visa and Vulcan Energy

-0.92

Correlation Coefficient

Visa  Vulcan Energy

Pay attention - limited upside

The 3 months correlation between Visa and Vulcan is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Vulcan Energy Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Energy 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 Vulcan Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Energy Resources has no effect on the direction of Visa i.e., Visa and Vulcan Energy go up and down completely randomly.

Pair Corralation between Visa and Vulcan Energy

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.23 times more return on investment than Vulcan Energy. However, Visa Class A is 4.26 times less risky than Vulcan Energy. It trades about 0.11 of its potential returns per unit of risk. Vulcan Energy Resources is currently generating about -0.05 per unit of risk. If you would invest  31,435  in Visa Class A on December 19, 2024 and sell it today you would earn a total of  2,042  from holding Visa Class A or generate 6.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Visa Class A  vs.  Vulcan Energy Resources

Visa Class A

Risk-Adjusted Performance

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 weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Vulcan Energy Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vulcan Energy Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Visa and Vulcan Energy

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

The idea behind Visa Class A and Vulcan Energy 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.