Correlation Between Visa and E3 LITHIUM

Can any of the company-specific risk be diversified away by investing in both Visa and E3 LITHIUM 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 E3 LITHIUM 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 E3 LITHIUM LTD, you can compare the effects of market volatilities on Visa and E3 LITHIUM 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 E3 LITHIUM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and E3 LITHIUM.

Diversification Opportunities for Visa and E3 LITHIUM

-0.77

Correlation Coefficient

Visa  E3 LITHIUM

Pay attention - limited upside

The 3 months correlation between Visa and OW3 is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and E3 LITHIUM LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E3 LITHIUM LTD 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 E3 LITHIUM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E3 LITHIUM LTD has no effect on the direction of Visa i.e., Visa and E3 LITHIUM go up and down completely randomly.

Pair Corralation between Visa and E3 LITHIUM

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.24 times more return on investment than E3 LITHIUM. However, Visa Class A is 4.14 times less risky than E3 LITHIUM. It trades about 0.3 of its potential returns per unit of risk. E3 LITHIUM LTD is currently generating about -0.07 per unit of risk. If you would invest  30,856  in Visa Class A on December 5, 2024 and sell it today you would earn a total of  5,326  from holding Visa Class A or generate 17.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Visa Class A  vs.  E3 LITHIUM LTD

Visa Class A

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 23 (%) 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.

E3 LITHIUM LTD

Risk-Adjusted Performance

Very Weak

Over the last 90 days E3 LITHIUM LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Visa and E3 LITHIUM

The main advantage of trading using opposite Visa and E3 LITHIUM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, E3 LITHIUM 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 E3 LITHIUM will offset losses from the drop in E3 LITHIUM's long position.

The idea behind Visa Class A and E3 LITHIUM LTD 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 Global Correlations module to find global opportunities by holding instruments from different markets.