Correlation Between Visa and CLEANTECH LITH

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

Diversification Opportunities for Visa and CLEANTECH LITH

-0.67

Correlation Coefficient

Visa  CLEANTECH LITH

Excellent diversification

The 3 months correlation between Visa and CLEANTECH is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and CLEANTECH LITH LS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CLEANTECH LITH LS 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 CLEANTECH LITH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CLEANTECH LITH LS has no effect on the direction of Visa i.e., Visa and CLEANTECH LITH go up and down completely randomly.

Pair Corralation between Visa and CLEANTECH LITH

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.23 times more return on investment than CLEANTECH LITH. However, Visa Class A is 4.37 times less risky than CLEANTECH LITH. It trades about 0.11 of its potential returns per unit of risk. CLEANTECH LITH LS is currently generating about -0.07 per unit of risk. If you would invest  28,992  in Visa Class A on September 16, 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	Weak
Accuracy	100.0%
Values	Daily Returns

Visa Class A  vs.  CLEANTECH LITH LS

Visa Class A

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CLEANTECH LITH LS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Visa and CLEANTECH LITH

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

The idea behind Visa Class A and CLEANTECH LITH LS 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.