Correlation Between Visa and Lanner Electronics

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

Diversification Opportunities for Visa and Lanner Electronics

0.13

Correlation Coefficient

Visa  Lanner Electronics

Average diversification

The 3 months correlation between Visa and Lanner is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Lanner Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lanner Electronics 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 Lanner Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lanner Electronics has no effect on the direction of Visa i.e., Visa and Lanner Electronics go up and down completely randomly.

Pair Corralation between Visa and Lanner Electronics

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.85 times more return on investment than Lanner Electronics. However, Visa Class A is 1.18 times less risky than Lanner Electronics. It trades about 0.22 of its potential returns per unit of risk. Lanner Electronics is currently generating about 0.06 per unit of risk. If you would invest  27,442  in Visa Class A on September 29, 2024 and sell it today you would earn a total of  4,424  from holding Visa Class A or generate 16.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Visa Class A  vs.  Lanner Electronics

Visa Class A

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 17 (%) 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.

Lanner Electronics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lanner Electronics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Lanner Electronics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Visa and Lanner Electronics

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

The idea behind Visa Class A and Lanner Electronics 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.