Correlation Between Visa and Flex LNG
Can any of the company-specific risk be diversified away by investing in both Visa and Flex LNG 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 Flex LNG 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 Flex LNG, you can compare the effects of market volatilities on Visa and Flex LNG 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 Flex LNG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Flex LNG.
Diversification Opportunities for Visa and Flex LNG
Very good diversification
The 3 months correlation between Visa and Flex is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Flex LNG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flex LNG 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 Flex LNG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flex LNG has no effect on the direction of Visa i.e., Visa and Flex LNG go up and down completely randomly.
Pair Corralation between Visa and Flex LNG
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.76 times more return on investment than Flex LNG. However, Visa Class A is 1.31 times less risky than Flex LNG. It trades about 0.11 of its potential returns per unit of risk. Flex LNG is currently generating about -0.09 per unit of risk. If you would invest 28,992 in Visa Class A on September 14, 2024 and sell it today you would earn a total of 2,482 from holding Visa Class A or generate 8.56% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Visa Class A vs. Flex LNG
Performance |
Timeline |
Visa Class A |
Flex LNG |
Visa and Flex LNG Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Visa and Flex LNG
The main advantage of trading using opposite Visa and Flex LNG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Flex LNG 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 Flex LNG will offset losses from the drop in Flex LNG's long position.Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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