Correlation Between Visa and Lucara Diamond
Can any of the company-specific risk be diversified away by investing in both Visa and Lucara Diamond 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 Lucara Diamond 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 Lucara Diamond Corp, you can compare the effects of market volatilities on Visa and Lucara Diamond 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 Lucara Diamond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Lucara Diamond.
Diversification Opportunities for Visa and Lucara Diamond
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Visa and Lucara is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Lucara Diamond Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lucara Diamond 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 Lucara Diamond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lucara Diamond Corp has no effect on the direction of Visa i.e., Visa and Lucara Diamond go up and down completely randomly.
Pair Corralation between Visa and Lucara Diamond
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.18 times more return on investment than Lucara Diamond. However, Visa Class A is 5.43 times less risky than Lucara Diamond. It trades about 0.6 of its potential returns per unit of risk. Lucara Diamond Corp is currently generating about -0.2 per unit of risk. If you would invest 31,167 in Visa Class A on November 8, 2024 and sell it today you would earn a total of 3,748 from holding Visa Class A or generate 12.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Visa Class A vs. Lucara Diamond Corp
Performance |
| Timeline |
| Visa Class A |
| Lucara Diamond Corp |
Visa and Lucara Diamond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Lucara Diamond
The main advantage of trading using opposite Visa and Lucara Diamond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Lucara Diamond 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 Lucara Diamond will offset losses from the drop in Lucara Diamond's long position.| Visa vs. American Express | Visa vs. Upstart Holdings | Visa vs. Capital One Financial | Visa vs. Ally Financial |
| Lucara Diamond vs. Mountain Province Diamonds | Lucara Diamond vs. Lundin Gold | Lucara Diamond vs. Mandalay Resources Corp | Lucara Diamond vs. North Arrow Minerals |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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