Correlation Between Visa and LendingClub Corp
Can any of the company-specific risk be diversified away by investing in both Visa and LendingClub Corp 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 LendingClub Corp 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 LendingClub Corp, you can compare the effects of market volatilities on Visa and LendingClub Corp 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 LendingClub Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and LendingClub Corp.
Diversification Opportunities for Visa and LendingClub Corp
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and LendingClub is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and LendingClub Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LendingClub Corp 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 LendingClub Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LendingClub Corp has no effect on the direction of Visa i.e., Visa and LendingClub Corp go up and down completely randomly.
Pair Corralation between Visa and LendingClub Corp
Taking into account the 90-day investment horizon Visa is expected to generate 2.97 times less return on investment than LendingClub Corp. But when comparing it to its historical volatility, Visa Class A is 2.94 times less risky than LendingClub Corp. It trades about 0.29 of its potential returns per unit of risk. LendingClub Corp is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 1,246 in LendingClub Corp on August 24, 2024 and sell it today you would earn a total of 344.00 from holding LendingClub Corp or generate 27.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Visa Class A vs. LendingClub Corp
Performance |
| Timeline |
| Visa Class A |
| LendingClub Corp |
Visa and LendingClub Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and LendingClub Corp
The main advantage of trading using opposite Visa and LendingClub Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, LendingClub Corp 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 LendingClub Corp will offset losses from the drop in LendingClub Corp's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| LendingClub Corp vs. Navient Corp | LendingClub Corp vs. Green Dot | LendingClub Corp vs. Orix Corp Ads | LendingClub Corp vs. FirstCash |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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