Correlation Between Visa and Lyxor UCITS

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

Diversification Opportunities for Visa and Lyxor UCITS

0.68

Correlation Coefficient

Visa  Lyxor UCITS

Poor diversification

The 3 months correlation between Visa and Lyxor is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Lyxor UCITS EuroMTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor UCITS EuroMTS 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 Lyxor UCITS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor UCITS EuroMTS has no effect on the direction of Visa i.e., Visa and Lyxor UCITS go up and down completely randomly.

Pair Corralation between Visa and Lyxor UCITS

Taking into account the 90-day investment horizon Visa Class A is expected to generate 15.96 times more return on investment than Lyxor UCITS. However, Visa is 15.96 times more volatile than Lyxor UCITS EuroMTS. It trades about 0.17 of its potential returns per unit of risk. Lyxor UCITS EuroMTS is currently generating about 0.29 per unit of risk. If you would invest  27,801  in Visa Class A on September 3, 2024 and sell it today you would earn a total of  3,864  from holding Visa Class A or generate 13.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Visa Class A  vs.  Lyxor UCITS EuroMTS

Visa Class A

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Lyxor UCITS EuroMTS

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor UCITS EuroMTS are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Lyxor UCITS is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Visa and Lyxor UCITS

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

The idea behind Visa Class A and Lyxor UCITS EuroMTS 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.