Correlation Between Agriculture Natural and Visa

Can any of the company-specific risk be diversified away by investing in both Agriculture Natural and Visa 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 Agriculture Natural and Visa into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Agriculture Natural Solutions and Visa Class A, you can compare the effects of market volatilities on Agriculture Natural and Visa 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 Agriculture Natural with a short position of Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agriculture Natural and Visa.

Diversification Opportunities for Agriculture Natural and Visa

0.62

Correlation Coefficient

Agriculture Natural  Visa

Poor diversification

The 3 months correlation between Agriculture and Visa is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Agriculture Natural Solutions and Visa Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Class A and Agriculture Natural 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 Agriculture Natural Solutions are associated (or correlated) with Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Class A has no effect on the direction of Agriculture Natural i.e., Agriculture Natural and Visa go up and down completely randomly.

Pair Corralation between Agriculture Natural and Visa

Assuming the 90 days horizon Agriculture Natural Solutions is expected to generate 10.27 times more return on investment than Visa. However, Agriculture Natural is 10.27 times more volatile than Visa Class A. It trades about 0.07 of its potential returns per unit of risk. Visa Class A is currently generating about 0.09 per unit of risk. If you would invest  22.00  in Agriculture Natural Solutions on September 18, 2024 and sell it today you would earn a total of  8.00  from holding Agriculture Natural Solutions or generate 36.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	28.08%
Values	Daily Returns

Agriculture Natural Solutions  vs.  Visa Class A

Agriculture Natural

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Agriculture Natural Solutions are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, Agriculture Natural showed solid returns over the last few months and may actually be approaching a breakup point.

Visa Class A

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Agriculture Natural and Visa

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

The idea behind Agriculture Natural Solutions and Visa Class A 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.