Correlation Between Visa and Oaktree Specialty

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

Diversification Opportunities for Visa and Oaktree Specialty

-0.45

Correlation Coefficient

Visa  Oaktree Specialty

Very good diversification

The 3 months correlation between Visa and Oaktree is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Oaktree Specialty Lending in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oaktree Specialty Lending 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 Oaktree Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oaktree Specialty Lending has no effect on the direction of Visa i.e., Visa and Oaktree Specialty go up and down completely randomly.

Pair Corralation between Visa and Oaktree Specialty

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.06 times more return on investment than Oaktree Specialty. However, Visa is 1.06 times more volatile than Oaktree Specialty Lending. It trades about 0.23 of its potential returns per unit of risk. Oaktree Specialty Lending is currently generating about -0.05 per unit of risk. If you would invest  27,464  in Visa Class A on September 27, 2024 and sell it today you would earn a total of  4,627  from holding Visa Class A or generate 16.85% return on investment over 90 days.

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

Visa Class A  vs.  Oaktree Specialty Lending

Visa Class A

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Oaktree Specialty Lending

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oaktree Specialty Lending has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Oaktree Specialty is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Visa and Oaktree Specialty

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

The idea behind Visa Class A and Oaktree Specialty Lending 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.