Correlation Between Visa and LAM THAO

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

Diversification Opportunities for Visa and LAM THAO

-0.26

Correlation Coefficient

Visa  LAM THAO

Very good diversification

The 3 months correlation between Visa and LAM is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and LAM THAO FERTI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LAM THAO FERTI 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 LAM THAO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LAM THAO FERTI has no effect on the direction of Visa i.e., Visa and LAM THAO go up and down completely randomly.

Pair Corralation between Visa and LAM THAO

Taking into account the 90-day investment horizon Visa is expected to generate 1.95 times less return on investment than LAM THAO. But when comparing it to its historical volatility, Visa Class A is 1.45 times less risky than LAM THAO. It trades about 0.06 of its potential returns per unit of risk. LAM THAO FERTI is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,180,000  in LAM THAO FERTI on September 28, 2024 and sell it today you would earn a total of  50,000  from holding LAM THAO FERTI or generate 2.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.3%
Values	Daily Returns

Visa Class A  vs.  LAM THAO FERTI

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.

LAM THAO FERTI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LAM THAO FERTI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, LAM THAO is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Visa and LAM THAO

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

The idea behind Visa Class A and LAM THAO FERTI 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.