Correlation Between Visa and Lan Fa
Can any of the company-specific risk be diversified away by investing in both Visa and Lan Fa 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 Lan Fa 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 Lan Fa Textile, you can compare the effects of market volatilities on Visa and Lan Fa 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 Lan Fa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Lan Fa.
Diversification Opportunities for Visa and Lan Fa
Excellent diversification
The 3 months correlation between Visa and Lan is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Lan Fa Textile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lan Fa Textile 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 Lan Fa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lan Fa Textile has no effect on the direction of Visa i.e., Visa and Lan Fa go up and down completely randomly.
Pair Corralation between Visa and Lan Fa
Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.51 times more return on investment than Lan Fa. However, Visa is 1.51 times more volatile than Lan Fa Textile. It trades about 0.17 of its potential returns per unit of risk. Lan Fa Textile is currently generating about -0.12 per unit of risk. If you would invest 27,584 in Visa Class A on August 30, 2024 and sell it today you would earn a total of 3,886 from holding Visa Class A or generate 14.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.44% |
| Values | Daily Returns |
Visa Class A vs. Lan Fa Textile
Performance |
| Timeline |
| Visa Class A |
| Lan Fa Textile |
Visa and Lan Fa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Lan Fa
The main advantage of trading using opposite Visa and Lan Fa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Lan Fa 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 Lan Fa will offset losses from the drop in Lan Fa's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Lan Fa vs. Lealea Enterprise Co | Lan Fa vs. Li Peng Enterprise | Lan Fa vs. De Licacy Industrial | Lan Fa vs. Chyang Sheng Dyeing |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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