Correlation Between Visa and Life Healthcare
Can any of the company-specific risk be diversified away by investing in both Visa and Life Healthcare 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 Life Healthcare 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 Life Healthcare Group, you can compare the effects of market volatilities on Visa and Life Healthcare 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 Life Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Life Healthcare.
Diversification Opportunities for Visa and Life Healthcare
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Visa and Life is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Life Healthcare Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Healthcare Group 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 Life Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Healthcare Group has no effect on the direction of Visa i.e., Visa and Life Healthcare go up and down completely randomly.
Pair Corralation between Visa and Life Healthcare
Taking into account the 90-day investment horizon Visa is expected to generate 1.12 times less return on investment than Life Healthcare. But when comparing it to its historical volatility, Visa Class A is 2.39 times less risky than Life Healthcare. It trades about 0.09 of its potential returns per unit of risk. Life Healthcare Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 242.00 in Life Healthcare Group on September 24, 2024 and sell it today you would earn a total of 110.00 from holding Life Healthcare Group or generate 45.45% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 99.8% |
Values | Daily Returns |
Visa Class A vs. Life Healthcare Group
Performance |
Timeline |
Visa Class A |
Life Healthcare Group |
Visa and Life Healthcare Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Visa and Life Healthcare
The main advantage of trading using opposite Visa and Life Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Life Healthcare 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 Life Healthcare will offset losses from the drop in Life Healthcare's long position.Visa vs. American Express | Visa vs. Upstart Holdings | Visa vs. Capital One Financial | Visa vs. Ally Financial |
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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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