Correlation Between Visa and Marathon Oil
Can any of the company-specific risk be diversified away by investing in both Visa and Marathon Oil 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 Marathon Oil 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 Marathon Oil, you can compare the effects of market volatilities on Visa and Marathon Oil 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 Marathon Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Marathon Oil.
Diversification Opportunities for Visa and Marathon Oil
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and Marathon is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Marathon Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marathon Oil 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 Marathon Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marathon Oil has no effect on the direction of Visa i.e., Visa and Marathon Oil go up and down completely randomly.
Pair Corralation between Visa and Marathon Oil
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.43 times more return on investment than Marathon Oil. However, Visa Class A is 2.34 times less risky than Marathon Oil. It trades about 0.09 of its potential returns per unit of risk. Marathon Oil is currently generating about 0.03 per unit of risk. If you would invest 20,548 in Visa Class A on August 30, 2024 and sell it today you would earn a total of 10,922 from holding Visa Class A or generate 53.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 82.42% |
| Values | Daily Returns |
Visa Class A vs. Marathon Oil
Performance |
| Timeline |
| Visa Class A |
| Marathon Oil |
Visa and Marathon Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Marathon Oil
The main advantage of trading using opposite Visa and Marathon Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Marathon Oil 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 Marathon Oil will offset losses from the drop in Marathon Oil's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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