Correlation Between Visa and Lotte Energy
Can any of the company-specific risk be diversified away by investing in both Visa and Lotte Energy 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 Lotte Energy 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 Lotte Energy Materials, you can compare the effects of market volatilities on Visa and Lotte Energy 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 Lotte Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Lotte Energy.
Diversification Opportunities for Visa and Lotte Energy
-0.93 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Visa and Lotte is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Lotte Energy Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Energy Materials 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 Lotte Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Energy Materials has no effect on the direction of Visa i.e., Visa and Lotte Energy go up and down completely randomly.
Pair Corralation between Visa and Lotte Energy
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.42 times more return on investment than Lotte Energy. However, Visa Class A is 2.39 times less risky than Lotte Energy. It trades about 0.11 of its potential returns per unit of risk. Lotte Energy Materials is currently generating about -0.28 per unit of risk. If you would invest 28,506 in Visa Class A on September 7, 2024 and sell it today you would earn a total of 2,402 from holding Visa Class A or generate 8.43% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 92.19% |
Values | Daily Returns |
Visa Class A vs. Lotte Energy Materials
Performance |
Timeline |
Visa Class A |
Lotte Energy Materials |
Visa and Lotte Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Visa and Lotte Energy
The main advantage of trading using opposite Visa and Lotte Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Lotte Energy 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 Lotte Energy will offset losses from the drop in Lotte Energy's long position.Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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