Correlation Between Launch One and Visa

Can any of the company-specific risk be diversified away by investing in both Launch One and Visa 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 Launch One and Visa into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Launch One Acquisition and Visa Class A, you can compare the effects of market volatilities on Launch One and Visa 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 Launch One with a short position of Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Launch One and Visa.

Diversification Opportunities for Launch One and Visa

0.79

Correlation Coefficient

Launch One  Visa

Poor diversification

The 3 months correlation between Launch and Visa is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Launch One Acquisition and Visa Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Class A and Launch One 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 Launch One Acquisition are associated (or correlated) with Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Class A has no effect on the direction of Launch One i.e., Launch One and Visa go up and down completely randomly.

Pair Corralation between Launch One and Visa

Given the investment horizon of 90 days Launch One is expected to generate 16.29 times less return on investment than Visa. But when comparing it to its historical volatility, Launch One Acquisition is 13.92 times less risky than Visa. It trades about 0.17 of its potential returns per unit of risk. Visa Class A is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  28,630  in Visa Class A on September 21, 2024 and sell it today you would earn a total of  2,858  from holding Visa Class A or generate 9.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Launch One Acquisition  vs.  Visa Class A

Launch One Acquisition

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Launch One Acquisition are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Launch One is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Visa Class A

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Launch One and Visa

The main advantage of trading using opposite Launch One and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Launch One position performs unexpectedly, Visa 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 Visa will offset losses from the drop in Visa's long position.

The idea behind Launch One Acquisition and Visa Class A pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.