Correlation Between Visa and Li Ning
Can any of the company-specific risk be diversified away by investing in both Visa and Li Ning 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 Li Ning 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 Li Ning Company, you can compare the effects of market volatilities on Visa and Li Ning 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 Li Ning. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Li Ning.
Diversification Opportunities for Visa and Li Ning
Significant diversification
The 3 months correlation between Visa and LNLB is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Li Ning Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Ning Company 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 Li Ning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li Ning Company has no effect on the direction of Visa i.e., Visa and Li Ning go up and down completely randomly.
Pair Corralation between Visa and Li Ning
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.39 times more return on investment than Li Ning. However, Visa Class A is 2.58 times less risky than Li Ning. It trades about 0.34 of its potential returns per unit of risk. Li Ning Company is currently generating about 0.05 per unit of risk. If you would invest 29,018 in Visa Class A on September 2, 2024 and sell it today you would earn a total of 2,490 from holding Visa Class A or generate 8.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Visa Class A vs. Li Ning Company
Performance |
| Timeline |
| Visa Class A |
| Li Ning Company |
Visa and Li Ning Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Li Ning
The main advantage of trading using opposite Visa and Li Ning positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Li Ning 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 Li Ning will offset losses from the drop in Li Ning's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Li Ning vs. Global Ship Lease | Li Ning vs. Perseus Mining Limited | Li Ning vs. Playtech plc | Li Ning vs. Uber Technologies |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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