Correlation Between Visa and LG Innotek
Can any of the company-specific risk be diversified away by investing in both Visa and LG Innotek 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 LG Innotek 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 LG Innotek Co, you can compare the effects of market volatilities on Visa and LG Innotek 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 LG Innotek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and LG Innotek.
Diversification Opportunities for Visa and LG Innotek
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Visa and 011070 is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and LG Innotek Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Innotek 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 LG Innotek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Innotek has no effect on the direction of Visa i.e., Visa and LG Innotek go up and down completely randomly.
Pair Corralation between Visa and LG Innotek
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.38 times more return on investment than LG Innotek. However, Visa Class A is 2.66 times less risky than LG Innotek. It trades about 0.09 of its potential returns per unit of risk. LG Innotek Co is currently generating about -0.05 per unit of risk. If you would invest 25,457 in Visa Class A on September 4, 2024 and sell it today you would earn a total of 6,208 from holding Visa Class A or generate 24.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 96.76% |
| Values | Daily Returns |
Visa Class A vs. LG Innotek Co
Performance |
| Timeline |
| Visa Class A |
| LG Innotek |
Visa and LG Innotek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and LG Innotek
The main advantage of trading using opposite Visa and LG Innotek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, LG Innotek 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 LG Innotek will offset losses from the drop in LG Innotek's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| LG Innotek vs. Daejung Chemicals Metals | LG Innotek vs. DONGKUK TED METAL | LG Innotek vs. GS Retail Co | LG Innotek vs. Youngsin Metal Industrial |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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