Correlation Between Visa and Invesco Gold

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

Diversification Opportunities for Visa and Invesco Gold

-0.58

Correlation Coefficient

Visa  Invesco Gold

Excellent diversification

The 3 months correlation between Visa and Invesco is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Invesco Gold Special in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Gold Special 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 Invesco Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Gold Special has no effect on the direction of Visa i.e., Visa and Invesco Gold go up and down completely randomly.

Pair Corralation between Visa and Invesco Gold

Taking into account the 90-day investment horizon Visa Class A is expected to under-perform the Invesco Gold. But the stock apears to be less risky and, when comparing its historical volatility, Visa Class A is 2.2 times less risky than Invesco Gold. The stock trades about -0.07 of its potential returns per unit of risk. The Invesco Gold Special is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,366  in Invesco Gold Special on March 2, 2024 and sell it today you would earn a total of  235.00  from holding Invesco Gold Special or generate 9.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.73%
Values	Daily Returns

Visa Class A  vs.  Invesco Gold Special

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 newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Invesco Gold Special

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Gold Special are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Invesco Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Invesco Gold

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

The idea behind Visa Class A and Invesco Gold Special 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.