Correlation Between Visa and Lindsay
Can any of the company-specific risk be diversified away by investing in both Visa and Lindsay 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 Lindsay 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 Lindsay, you can compare the effects of market volatilities on Visa and Lindsay 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 Lindsay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Lindsay.
Diversification Opportunities for Visa and Lindsay
Very weak diversification
The 3 months correlation between Visa and Lindsay is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Lindsay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lindsay 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 Lindsay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lindsay has no effect on the direction of Visa i.e., Visa and Lindsay go up and down completely randomly.
Pair Corralation between Visa and Lindsay
Taking into account the 90-day investment horizon Visa is expected to generate 1.03 times less return on investment than Lindsay. But when comparing it to its historical volatility, Visa Class A is 2.03 times less risky than Lindsay. It trades about 0.41 of its potential returns per unit of risk. Lindsay is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 11,787 in Lindsay on August 30, 2024 and sell it today you would earn a total of 1,375 from holding Lindsay or generate 11.67% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Visa Class A vs. Lindsay
Performance |
Timeline |
Visa Class A |
Lindsay |
Visa and Lindsay Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Visa and Lindsay
The main advantage of trading using opposite Visa and Lindsay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Lindsay 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 Lindsay will offset losses from the drop in Lindsay's long position.Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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