Correlation Between Visa and Lifex Income

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

Diversification Opportunities for Visa and Lifex Income

0.22

Correlation Coefficient

Visa  Lifex Income

Modest diversification

The 3 months correlation between Visa and Lifex is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Lifex Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifex Income 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 Lifex Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifex Income has no effect on the direction of Visa i.e., Visa and Lifex Income go up and down completely randomly.

Pair Corralation between Visa and Lifex Income

If you would invest  30,964  in Visa Class A on September 16, 2024 and sell it today you would earn a total of  510.00  from holding Visa Class A or generate 1.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	38.1%
Values	Daily Returns

Visa Class A  vs.  Lifex Income

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.

Lifex Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lifex Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Lifex Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and Lifex Income

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

The idea behind Visa Class A and Lifex Income 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.

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