Correlation Between Visa and Luxi Chemical

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

Diversification Opportunities for Visa and Luxi Chemical

0.45
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Visa and Luxi is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Luxi Chemical Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luxi Chemical Group 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 Luxi Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luxi Chemical Group has no effect on the direction of Visa i.e., Visa and Luxi Chemical go up and down completely randomly.

Pair Corralation between Visa and Luxi Chemical

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.57 times more return on investment than Luxi Chemical. However, Visa Class A is 1.75 times less risky than Luxi Chemical. It trades about 0.11 of its potential returns per unit of risk. Luxi Chemical Group is currently generating about 0.0 per unit of risk. If you would invest  26,932  in Visa Class A on September 1, 2024 and sell it today you would earn a total of  4,576  from holding Visa Class A or generate 16.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy97.62%
ValuesDaily Returns

Visa Class A  vs.  Luxi Chemical Group

 Performance 
       Timeline  
Visa Class A 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 12 (%) 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.
Luxi Chemical Group 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Luxi Chemical Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Luxi Chemical may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Visa and Luxi Chemical Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Visa and Luxi Chemical

The main advantage of trading using opposite Visa and Luxi Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Luxi Chemical 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 Luxi Chemical will offset losses from the drop in Luxi Chemical's long position.
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The idea behind Visa Class A and Luxi Chemical Group 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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