Correlation Between Visa and Lion Chemtech
Can any of the company-specific risk be diversified away by investing in both Visa and Lion Chemtech 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 Lion Chemtech 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 Lion Chemtech Co, you can compare the effects of market volatilities on Visa and Lion Chemtech 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 Lion Chemtech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Lion Chemtech.
Diversification Opportunities for Visa and Lion Chemtech
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and Lion is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Lion Chemtech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion Chemtech 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 Lion Chemtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion Chemtech has no effect on the direction of Visa i.e., Visa and Lion Chemtech go up and down completely randomly.
Pair Corralation between Visa and Lion Chemtech
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.48 times more return on investment than Lion Chemtech. However, Visa Class A is 2.07 times less risky than Lion Chemtech. It trades about 0.08 of its potential returns per unit of risk. Lion Chemtech Co is currently generating about -0.05 per unit of risk. If you would invest 25,837 in Visa Class A on August 25, 2024 and sell it today you would earn a total of 5,155 from holding Visa Class A or generate 19.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.07% |
| Values | Daily Returns |
Visa Class A vs. Lion Chemtech Co
Performance |
| Timeline |
| Visa Class A |
| Lion Chemtech |
Visa and Lion Chemtech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Lion Chemtech
The main advantage of trading using opposite Visa and Lion Chemtech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Lion Chemtech 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 Lion Chemtech will offset losses from the drop in Lion Chemtech's long position.| Visa vs. American Express | Visa vs. Morningstar Unconstrained Allocation | Visa vs. Sitka Gold Corp | Visa vs. MSCI ACWI exAUCONSUMER |
| Lion Chemtech vs. Nature and Environment | Lion Chemtech vs. Cheryong Industrial CoLtd | Lion Chemtech vs. IL Science Co |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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