Correlation Between Visa and LendingClub
Can any of the company-specific risk be diversified away by investing in both Visa and LendingClub 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 LendingClub into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Inc and LendingClub, you can compare the effects of market volatilities on Visa and LendingClub 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 LendingClub. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and LendingClub.
Diversification Opportunities for Visa and LendingClub
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Visa and LendingClub is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Visa Inc and LendingClub in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LendingClub 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 Inc are associated (or correlated) with LendingClub. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LendingClub has no effect on the direction of Visa i.e., Visa and LendingClub go up and down completely randomly.
Pair Corralation between Visa and LendingClub
Assuming the 90 days trading horizon Visa is expected to generate 1.48 times less return on investment than LendingClub. But when comparing it to its historical volatility, Visa Inc is 2.17 times less risky than LendingClub. It trades about 0.31 of its potential returns per unit of risk. LendingClub is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 1,285 in LendingClub on September 5, 2024 and sell it today you would earn a total of 209.00 from holding LendingClub or generate 16.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Inc vs. LendingClub
Performance |
| Timeline |
| Visa Inc |
| LendingClub |
Visa and LendingClub Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and LendingClub
The main advantage of trading using opposite Visa and LendingClub positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, LendingClub 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 LendingClub will offset losses from the drop in LendingClub's long position.The idea behind Visa Inc and LendingClub 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.| LendingClub vs. Visa Inc | LendingClub vs. Visa Inc | LendingClub vs. American Express | LendingClub vs. ORIX Corporation |
Check out your portfolio center.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.
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