Correlation Between Visa and West Vault

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

Diversification Opportunities for Visa and West Vault

0.62

Correlation Coefficient

Visa  West Vault

Poor diversification

The 3 months correlation between Visa and West is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and West Vault Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Vault Mining 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 West Vault. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Vault Mining has no effect on the direction of Visa i.e., Visa and West Vault go up and down completely randomly.

Pair Corralation between Visa and West Vault

Taking into account the 90-day investment horizon Visa is expected to generate 2.53 times less return on investment than West Vault. But when comparing it to its historical volatility, Visa Class A is 4.57 times less risky than West Vault. It trades about 0.13 of its potential returns per unit of risk. West Vault Mining is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  66.00  in West Vault Mining on December 18, 2024 and sell it today you would earn a total of  10.00  from holding West Vault Mining or generate 15.15% return on investment over 90 days.

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

Visa Class A  vs.  West Vault Mining

Visa Class A

Risk-Adjusted Performance

Modest

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.

West Vault Mining

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in West Vault Mining are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, West Vault reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and West Vault

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

The idea behind Visa Class A and West Vault Mining 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .