Correlation Between Visa and Valero Energy
Can any of the company-specific risk be diversified away by investing in both Visa and Valero 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 Valero 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 Valero Energy, you can compare the effects of market volatilities on Visa and Valero 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 Valero Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Valero Energy.
Diversification Opportunities for Visa and Valero Energy
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and Valero is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Valero Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valero 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 Valero Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valero Energy has no effect on the direction of Visa i.e., Visa and Valero Energy go up and down completely randomly.
Pair Corralation between Visa and Valero Energy
Taking into account the 90-day investment horizon Visa is expected to generate 2.03 times less return on investment than Valero Energy. But when comparing it to its historical volatility, Visa Class A is 2.09 times less risky than Valero Energy. It trades about 0.09 of its potential returns per unit of risk. Valero Energy is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 30,044 in Valero Energy on September 4, 2024 and sell it today you would earn a total of 11,578 from holding Valero Energy or generate 38.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 79.27% |
| Values | Daily Returns |
Visa Class A vs. Valero Energy
Performance |
| Timeline |
| Visa Class A |
| Valero Energy |
Visa and Valero Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Valero Energy
The main advantage of trading using opposite Visa and Valero Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Valero 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 Valero Energy will offset losses from the drop in Valero Energy's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Valero Energy vs. Brpr Corporate Offices | Valero Energy vs. Dell Technologies | Valero Energy vs. Unity Software | Valero Energy vs. Lupatech SA |
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 CEOs Directory module to screen CEOs from public companies around the world.
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