Correlation Between Visa and Global Lights

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

Diversification Opportunities for Visa and Global Lights

-0.08

Correlation Coefficient

Visa  Global Lights

Good diversification

The 3 months correlation between Visa and Global is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Global Lights Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Lights Acquisition 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 Global Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Lights Acquisition has no effect on the direction of Visa i.e., Visa and Global Lights go up and down completely randomly.

Pair Corralation between Visa and Global Lights

Taking into account the 90-day investment horizon Visa is expected to generate 44.89 times less return on investment than Global Lights. But when comparing it to its historical volatility, Visa Class A is 15.83 times less risky than Global Lights. It trades about 0.08 of its potential returns per unit of risk. Global Lights Acquisition is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Global Lights Acquisition on December 17, 2024 and sell it today you would earn a total of  8.00  from holding Global Lights Acquisition or generate 53.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	25.0%
Values	Daily Returns

Visa Class A  vs.  Global Lights Acquisition

Visa Class A

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Visa is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Global Lights Acquisition

Risk-Adjusted Performance

Solid

Over the last 90 days Global Lights Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively weak fundamental indicators, Global Lights reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Global Lights

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

The idea behind Visa Class A and Global Lights Acquisition 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.