Correlation Between Visa and Transocean

Can any of the company-specific risk be diversified away by investing in both Visa and Transocean 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 Transocean into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Visa Inc and Transocean, you can compare the effects of market volatilities on Visa and Transocean 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 Transocean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Transocean.

Diversification Opportunities for Visa and Transocean

0.01

Correlation Coefficient

Visa  Transocean

Significant diversification

The 3 months correlation between Visa and Transocean is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Visa Inc and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean 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 Inc are associated (or correlated) with Transocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transocean has no effect on the direction of Visa i.e., Visa and Transocean go up and down completely randomly.

Pair Corralation between Visa and Transocean

Assuming the 90 days trading horizon Visa Inc is expected to generate 0.43 times more return on investment than Transocean. However, Visa Inc is 2.3 times less risky than Transocean. It trades about 0.08 of its potential returns per unit of risk. Transocean is currently generating about 0.01 per unit of risk. If you would invest  5,658  in Visa Inc on October 10, 2024 and sell it today you would earn a total of  3,864  from holding Visa Inc or generate 68.29% return on investment over 90 days.

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

Visa Inc  vs.  Transocean

Visa Inc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Inc are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Visa sustained solid returns over the last few months and may actually be approaching a breakup point.

Transocean

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Transocean are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Transocean may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Visa and Transocean

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

The idea behind Visa Inc and Transocean 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.