Correlation Between Visa and Whiting Petroleum

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

Diversification Opportunities for Visa and Whiting Petroleum

-0.85

Correlation Coefficient

Visa  Whiting Petroleum

Pay attention - limited upside

The 3 months correlation between Visa and Whiting is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Whiting Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whiting Petroleum 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 Whiting Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whiting Petroleum has no effect on the direction of Visa i.e., Visa and Whiting Petroleum go up and down completely randomly.

Pair Corralation between Visa and Whiting Petroleum

Taking into account the 90-day investment horizon Visa is expected to generate 6.46 times less return on investment than Whiting Petroleum. But when comparing it to its historical volatility, Visa Class A is 9.56 times less risky than Whiting Petroleum. It trades about 0.12 of its potential returns per unit of risk. Whiting Petroleum is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  306.00  in Whiting Petroleum on October 8, 2024 and sell it today you would earn a total of  24.00  from holding Whiting Petroleum or generate 7.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Visa Class A  vs.  Whiting Petroleum

Visa Class A

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Whiting Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Whiting Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental drivers remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Visa and Whiting Petroleum

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

The idea behind Visa Class A and Whiting Petroleum 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.