Correlation Between Visa and Cocoa
Can any of the company-specific risk be diversified away by investing in both Visa and Cocoa 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 Cocoa 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 Cocoa, you can compare the effects of market volatilities on Visa and Cocoa 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 Cocoa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Cocoa.
Diversification Opportunities for Visa and Cocoa
Very weak diversification
The 3 months correlation between Visa and Cocoa is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Cocoa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cocoa 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 Cocoa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cocoa has no effect on the direction of Visa i.e., Visa and Cocoa go up and down completely randomly.
Pair Corralation between Visa and Cocoa
Taking into account the 90-day investment horizon Visa is expected to generate 4.18 times less return on investment than Cocoa. But when comparing it to its historical volatility, Visa Class A is 3.74 times less risky than Cocoa. It trades about 0.09 of its potential returns per unit of risk. Cocoa is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 327,700 in Cocoa on August 29, 2024 and sell it today you would earn a total of 585,700 from holding Cocoa or generate 178.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.16% |
| Values | Daily Returns |
Visa Class A vs. Cocoa
Performance |
| Timeline |
| Visa Class A |
| Cocoa |
Visa and Cocoa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Cocoa
The main advantage of trading using opposite Visa and Cocoa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Cocoa 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 Cocoa will offset losses from the drop in Cocoa's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Cocoa vs. Five Year Treasury Note | Cocoa vs. Micro Gold Futures | Cocoa vs. Class III Milk | Cocoa vs. Palladium |
Check out your portfolio center.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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device |