Correlation Between Visa and Lemtech Holdings

Can any of the company-specific risk be diversified away by investing in both Visa and Lemtech Holdings 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 Lemtech Holdings 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 Lemtech Holdings Co, you can compare the effects of market volatilities on Visa and Lemtech Holdings 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 Lemtech Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Lemtech Holdings.

Diversification Opportunities for Visa and Lemtech Holdings

0.67

Correlation Coefficient

Visa  Lemtech Holdings

Poor diversification

The 3 months correlation between Visa and Lemtech is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Lemtech Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lemtech Holdings 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 Lemtech Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lemtech Holdings has no effect on the direction of Visa i.e., Visa and Lemtech Holdings go up and down completely randomly.

Pair Corralation between Visa and Lemtech Holdings

Taking into account the 90-day investment horizon Visa is expected to generate 2.43 times less return on investment than Lemtech Holdings. But when comparing it to its historical volatility, Visa Class A is 2.66 times less risky than Lemtech Holdings. It trades about 0.07 of its potential returns per unit of risk. Lemtech Holdings Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  7,830  in Lemtech Holdings Co on October 22, 2024 and sell it today you would earn a total of  8,070  from holding Lemtech Holdings Co or generate 103.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Visa Class A  vs.  Lemtech Holdings Co

Visa Class A

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Lemtech Holdings

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lemtech Holdings Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lemtech Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Lemtech Holdings

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

The idea behind Visa Class A and Lemtech Holdings Co 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.