Correlation Between Visa and GAMCO Natural

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

Diversification Opportunities for Visa and GAMCO Natural

-0.42

Correlation Coefficient

Visa  GAMCO Natural

Very good diversification

The 3 months correlation between Visa and GAMCO is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and GAMCO Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAMCO Natural Resources 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 GAMCO Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAMCO Natural Resources has no effect on the direction of Visa i.e., Visa and GAMCO Natural go up and down completely randomly.

Pair Corralation between Visa and GAMCO Natural

Taking into account the 90-day investment horizon Visa Class A is expected to under-perform the GAMCO Natural. But the stock apears to be less risky and, when comparing its historical volatility, Visa Class A is 1.01 times less risky than GAMCO Natural. The stock trades about -0.01 of its potential returns per unit of risk. The GAMCO Natural Resources is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  496.00  in GAMCO Natural Resources on March 8, 2024 and sell it today you would earn a total of  51.00  from holding GAMCO Natural Resources or generate 10.28% 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.  GAMCO Natural Resources

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.

GAMCO Natural Resources

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GAMCO Natural Resources are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, GAMCO Natural may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Visa and GAMCO Natural

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

The idea behind Visa Class A and GAMCO Natural Resources 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 Transaction History module to view history of all your transactions and understand their impact on performance.