Correlation Between Visa and ConocoPhillips

Can any of the company-specific risk be diversified away by investing in both Visa and ConocoPhillips 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 ConocoPhillips 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 ConocoPhillips, you can compare the effects of market volatilities on Visa and ConocoPhillips 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 ConocoPhillips. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and ConocoPhillips.

Diversification Opportunities for Visa and ConocoPhillips

-0.36

Correlation Coefficient

Visa  ConocoPhillips

Very good diversification

The 3 months correlation between Visa and ConocoPhillips is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips 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 ConocoPhillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConocoPhillips has no effect on the direction of Visa i.e., Visa and ConocoPhillips go up and down completely randomly.

Pair Corralation between Visa and ConocoPhillips

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.72 times more return on investment than ConocoPhillips. However, Visa Class A is 1.38 times less risky than ConocoPhillips. It trades about -0.11 of its potential returns per unit of risk. ConocoPhillips is currently generating about -0.31 per unit of risk. If you would invest  27,776  in Visa Class A on February 7, 2024 and sell it today you would lose (509.00) from holding Visa Class A or give up 1.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Visa Class A  vs.  ConocoPhillips

Visa Class A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Visa Class A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Visa is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ConocoPhillips

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ConocoPhillips are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, ConocoPhillips may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Visa and ConocoPhillips

The main advantage of trading using opposite Visa and ConocoPhillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, ConocoPhillips 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 ConocoPhillips will offset losses from the drop in ConocoPhillips' long position.

The idea behind Visa Class A and ConocoPhillips 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.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.