Correlation Between Visa and APA
Can any of the company-specific risk be diversified away by investing in both Visa and APA 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 APA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Inc and APA Corporation, you can compare the effects of market volatilities on Visa and APA 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 APA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and APA.
Diversification Opportunities for Visa and APA
Weak diversification
The 3 months correlation between Visa and APA is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Visa Inc and APA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Corporation 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 Inc are associated (or correlated) with APA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APA Corporation has no effect on the direction of Visa i.e., Visa and APA go up and down completely randomly.
Pair Corralation between Visa and APA
Assuming the 90 days trading horizon Visa Inc is expected to generate 10.58 times more return on investment than APA. However, Visa is 10.58 times more volatile than APA Corporation. It trades about 0.14 of its potential returns per unit of risk. APA Corporation is currently generating about 0.21 per unit of risk. If you would invest 9,594 in Visa Inc on November 18, 2024 and sell it today you would earn a total of 438.00 from holding Visa Inc or generate 4.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Inc vs. APA Corp.
Performance |
| Timeline |
| Visa Inc |
| APA Corporation |
Visa and APA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and APA
The main advantage of trading using opposite Visa and APA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, APA 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 APA will offset losses from the drop in APA's long position.| Visa vs. Discover Financial Services | Visa vs. Bank of America | Visa vs. Truist Financial | Visa vs. SVB Financial Group |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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