Correlation Between Visa and Precious Metals
Can any of the company-specific risk be diversified away by investing in both Visa and Precious Metals 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 Precious Metals 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 Precious Metals Fund, you can compare the effects of market volatilities on Visa and Precious Metals 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 Precious Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Precious Metals.
Diversification Opportunities for Visa and Precious Metals
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Visa and Precious is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Precious Metals Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precious Metals 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 Precious Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precious Metals has no effect on the direction of Visa i.e., Visa and Precious Metals go up and down completely randomly.
Pair Corralation between Visa and Precious Metals
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.56 times more return on investment than Precious Metals. However, Visa Class A is 1.77 times less risky than Precious Metals. It trades about 0.35 of its potential returns per unit of risk. Precious Metals Fund is currently generating about -0.15 per unit of risk. If you would invest 28,929 in Visa Class A on September 1, 2024 and sell it today you would earn a total of 2,579 from holding Visa Class A or generate 8.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Precious Metals Fund
Performance |
| Timeline |
| Visa Class A |
| Precious Metals |
Visa and Precious Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Precious Metals
The main advantage of trading using opposite Visa and Precious Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Precious Metals 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 Precious Metals will offset losses from the drop in Precious Metals' long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Precious Metals vs. Energy Fund Investor | Precious Metals vs. Energy Services Fund | Precious Metals vs. Basic Materials Fund | Precious Metals vs. Health Care Fund |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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