Correlation Between Global Lights and Visa
Can any of the company-specific risk be diversified away by investing in both Global Lights and Visa 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 Global Lights and Visa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Lights Acquisition and Visa Class A, you can compare the effects of market volatilities on Global Lights and Visa 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 Global Lights with a short position of Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Lights and Visa.
Diversification Opportunities for Global Lights and Visa
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and Visa is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Global Lights Acquisition and Visa Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Class A and Global Lights 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 Global Lights Acquisition are associated (or correlated) with Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Class A has no effect on the direction of Global Lights i.e., Global Lights and Visa go up and down completely randomly.
Pair Corralation between Global Lights and Visa
Given the investment horizon of 90 days Global Lights is expected to generate 5.1 times less return on investment than Visa. But when comparing it to its historical volatility, Global Lights Acquisition is 8.27 times less risky than Visa. It trades about 0.2 of its potential returns per unit of risk. Visa Class A is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 28,482 in Visa Class A on September 12, 2024 and sell it today you would earn a total of 2,897 from holding Visa Class A or generate 10.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Lights Acquisition vs. Visa Class A
Performance |
| Timeline |
| Global Lights Acquisition |
| Visa Class A |
Global Lights and Visa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Lights and Visa
The main advantage of trading using opposite Global Lights and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Lights position performs unexpectedly, Visa 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 Visa will offset losses from the drop in Visa's long position.| Global Lights vs. Zhihu Inc ADR | Global Lights vs. Dave Busters Entertainment | Global Lights vs. NETGEAR | Global Lights vs. Q2 Holdings |
| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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