Correlation Between Visa and Lithium One
Can any of the company-specific risk be diversified away by investing in both Visa and Lithium One 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 Lithium One 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 Lithium One Metals, you can compare the effects of market volatilities on Visa and Lithium One 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 Lithium One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Lithium One.
Diversification Opportunities for Visa and Lithium One
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Visa and Lithium is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Lithium One Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium One 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 Lithium One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium One Metals has no effect on the direction of Visa i.e., Visa and Lithium One go up and down completely randomly.
Pair Corralation between Visa and Lithium One
Taking into account the 90-day investment horizon Visa is expected to generate 12.05 times less return on investment than Lithium One. But when comparing it to its historical volatility, Visa Class A is 21.73 times less risky than Lithium One. It trades about 0.1 of its potential returns per unit of risk. Lithium One Metals is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 45.00 in Lithium One Metals on November 28, 2024 and sell it today you would lose (43.88) from holding Lithium One Metals or give up 97.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Visa Class A vs. Lithium One Metals
Performance |
| Timeline |
| Visa Class A |
| Lithium One Metals |
Visa and Lithium One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Lithium One
The main advantage of trading using opposite Visa and Lithium One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Lithium One 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 Lithium One will offset losses from the drop in Lithium One'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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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