Correlation Between Visa and LCX
Can any of the company-specific risk be diversified away by investing in both Visa and LCX 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 LCX 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 LCX, you can compare the effects of market volatilities on Visa and LCX 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 LCX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and LCX.
Diversification Opportunities for Visa and LCX
Modest diversification
The 3 months correlation between Visa and LCX is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and LCX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LCX 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 LCX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LCX has no effect on the direction of Visa i.e., Visa and LCX go up and down completely randomly.
Pair Corralation between Visa and LCX
Taking into account the 90-day investment horizon Visa is expected to generate 4.63 times less return on investment than LCX. But when comparing it to its historical volatility, Visa Class A is 8.38 times less risky than LCX. It trades about 0.11 of its potential returns per unit of risk. LCX is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 25.00 in LCX on September 1, 2024 and sell it today you would earn a total of 5.00 from holding LCX or generate 20.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Visa Class A vs. LCX
Performance |
| Timeline |
| Visa Class A |
| LCX |
Visa and LCX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and LCX
The main advantage of trading using opposite Visa and LCX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, LCX 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 LCX will offset losses from the drop in LCX's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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