Correlation Between Visa and SM Energy
Can any of the company-specific risk be diversified away by investing in both Visa and SM Energy 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 SM Energy 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 SM Energy Co, you can compare the effects of market volatilities on Visa and SM Energy 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 SM Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and SM Energy.
Diversification Opportunities for Visa and SM Energy
Significant diversification
The 3 months correlation between Visa and SM Energy is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and SM Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Energy 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 SM Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Energy has no effect on the direction of Visa i.e., Visa and SM Energy go up and down completely randomly.
Pair Corralation between Visa and SM Energy
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.56 times more return on investment than SM Energy. However, Visa Class A is 1.77 times less risky than SM Energy. It trades about 0.37 of its potential returns per unit of risk. SM Energy Co is currently generating about 0.16 per unit of risk. If you would invest 28,365 in Visa Class A on August 27, 2024 and sell it today you would earn a total of 2,954 from holding Visa Class A or generate 10.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. SM Energy Co
Performance |
| Timeline |
| Visa Class A |
| SM Energy |
Visa and SM Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and SM Energy
The main advantage of trading using opposite Visa and SM Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, SM Energy 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 SM Energy will offset losses from the drop in SM Energy's long position.| Visa vs. American Express | Visa vs. Morningstar Unconstrained Allocation | Visa vs. Sitka Gold Corp | Visa vs. MSCI ACWI exAUCONSUMER |
| SM Energy vs. Vital Energy | SM Energy vs. Permian Resources | SM Energy vs. Matador Resources | SM Energy vs. Obsidian Energy |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
Other Complementary Tools
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing |