Correlation Between Visa and First Eagle

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

Diversification Opportunities for Visa and First Eagle

0.82

Correlation Coefficient

Visa  First Eagle

Very poor diversification

The 3 months correlation between Visa and First is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and First Eagle Smid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Eagle Smid 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 First Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Eagle Smid has no effect on the direction of Visa i.e., Visa and First Eagle go up and down completely randomly.

Pair Corralation between Visa and First Eagle

Taking into account the 90-day investment horizon Visa is expected to generate 1.05 times less return on investment than First Eagle. But when comparing it to its historical volatility, Visa Class A is 1.02 times less risky than First Eagle. It trades about 0.09 of its potential returns per unit of risk. First Eagle Smid is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  944.00  in First Eagle Smid on September 14, 2024 and sell it today you would earn a total of  268.00  from holding First Eagle Smid or generate 28.39% return on investment over 90 days.

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

Visa Class A  vs.  First Eagle Smid

Visa Class A

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

First Eagle Smid

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Eagle Smid are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, First Eagle is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and First Eagle

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

The idea behind Visa Class A and First Eagle Smid 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.