Correlation Between Visa and Sims Metal
Can any of the company-specific risk be diversified away by investing in both Visa and Sims Metal 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 Sims Metal 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 Sims Metal Management, you can compare the effects of market volatilities on Visa and Sims Metal 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 Sims Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Sims Metal.
Diversification Opportunities for Visa and Sims Metal
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and Sims is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Sims Metal Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sims Metal Management 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 Sims Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sims Metal Management has no effect on the direction of Visa i.e., Visa and Sims Metal go up and down completely randomly.
Pair Corralation between Visa and Sims Metal
If you would invest 22,385 in Visa Class A on September 12, 2024 and sell it today you would earn a total of 8,853 from holding Visa Class A or generate 39.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 0.27% |
| Values | Daily Returns |
Visa Class A vs. Sims Metal Management
Performance |
| Timeline |
| Visa Class A |
| Sims Metal Management |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Visa and Sims Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Sims Metal
The main advantage of trading using opposite Visa and Sims Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Sims Metal 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 Sims Metal will offset losses from the drop in Sims Metal's long position.The idea behind Visa Class A and Sims Metal Management pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Sims Metal vs. Steel Dynamics | Sims Metal vs. Cleveland Cliffs | Sims Metal vs. United States Steel | Sims Metal vs. ArcelorMittal SA ADR |
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.
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