Correlation Between Visa and Leeuwin Metals
Can any of the company-specific risk be diversified away by investing in both Visa and Leeuwin Metals 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 Leeuwin Metals 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 Leeuwin Metals, you can compare the effects of market volatilities on Visa and Leeuwin Metals 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 Leeuwin Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Leeuwin Metals.
Diversification Opportunities for Visa and Leeuwin Metals
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Visa and Leeuwin is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Leeuwin Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leeuwin Metals 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 Leeuwin Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leeuwin Metals has no effect on the direction of Visa i.e., Visa and Leeuwin Metals go up and down completely randomly.
Pair Corralation between Visa and Leeuwin Metals
Taking into account the 90-day investment horizon Visa is expected to generate 3.7 times less return on investment than Leeuwin Metals. But when comparing it to its historical volatility, Visa Class A is 6.32 times less risky than Leeuwin Metals. It trades about 0.08 of its potential returns per unit of risk. Leeuwin Metals is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 8.55 in Leeuwin Metals on November 3, 2024 and sell it today you would earn a total of 3.45 from holding Leeuwin Metals or generate 40.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.2% |
| Values | Daily Returns |
Visa Class A vs. Leeuwin Metals
Performance |
| Timeline |
| Visa Class A |
| Leeuwin Metals |
Visa and Leeuwin Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Leeuwin Metals
The main advantage of trading using opposite Visa and Leeuwin Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Leeuwin Metals 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 Leeuwin Metals will offset losses from the drop in Leeuwin Metals' long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Leeuwin Metals vs. Australian Unity Office | Leeuwin Metals vs. Macquarie Technology Group | Leeuwin Metals vs. Clime Investment Management | Leeuwin Metals vs. Cleanaway Waste Management |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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