Correlation Between Visa and Anglo American
Can any of the company-specific risk be diversified away by investing in both Visa and Anglo American 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 Anglo American 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 Anglo American plc, you can compare the effects of market volatilities on Visa and Anglo American 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 Anglo American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Anglo American.
Diversification Opportunities for Visa and Anglo American
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Visa and Anglo is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Anglo American plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anglo American plc 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 Anglo American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anglo American plc has no effect on the direction of Visa i.e., Visa and Anglo American go up and down completely randomly.
Pair Corralation between Visa and Anglo American
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.57 times more return on investment than Anglo American. However, Visa Class A is 1.75 times less risky than Anglo American. It trades about 0.1 of its potential returns per unit of risk. Anglo American plc is currently generating about 0.04 per unit of risk. If you would invest 27,343 in Visa Class A on September 3, 2024 and sell it today you would earn a total of 4,322 from holding Visa Class A or generate 15.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 96.9% |
| Values | Daily Returns |
Visa Class A vs. Anglo American plc
Performance |
| Timeline |
| Visa Class A |
| Anglo American plc |
Visa and Anglo American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Anglo American
The main advantage of trading using opposite Visa and Anglo American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Anglo American 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 Anglo American will offset losses from the drop in Anglo American's long position.| Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart Holdings | Visa vs. Ally Financial |
| Anglo American vs. Adtalem Global Education | Anglo American vs. Iridium Communications | Anglo American vs. IDP EDUCATION LTD | Anglo American vs. COMBA TELECOM SYST |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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