Correlation Between Visa and BAKER

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

Diversification Opportunities for Visa and BAKER

-0.74

Correlation Coefficient

Visa  BAKER

Pay attention - limited upside

The 3 months correlation between Visa and BAKER is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and BAKER HUGHES A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAKER HUGHES A 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 BAKER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAKER HUGHES A has no effect on the direction of Visa i.e., Visa and BAKER go up and down completely randomly.

Pair Corralation between Visa and BAKER

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.02 times more return on investment than BAKER. However, Visa is 1.02 times more volatile than BAKER HUGHES A. It trades about 0.11 of its potential returns per unit of risk. BAKER HUGHES A is currently generating about 0.06 per unit of risk. If you would invest  23,082  in Visa Class A on September 24, 2024 and sell it today you would earn a total of  8,689  from holding Visa Class A or generate 37.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	84.88%
Values	Daily Returns

Visa Class A  vs.  BAKER HUGHES A

Visa Class A

Risk-Adjusted Performance

17 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 17 (%) 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.

BAKER HUGHES A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BAKER HUGHES A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BAKER 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 BAKER

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

The idea behind Visa Class A and BAKER HUGHES 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.