Correlation Between Visa and Lixte Biotechnology

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

Diversification Opportunities for Visa and Lixte Biotechnology

0.03

Correlation Coefficient

Visa  Lixte Biotechnology

Significant diversification

The 3 months correlation between Visa and Lixte is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Lixte Biotechnology Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lixte Biotechnology 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 Lixte Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lixte Biotechnology has no effect on the direction of Visa i.e., Visa and Lixte Biotechnology go up and down completely randomly.

Pair Corralation between Visa and Lixte Biotechnology

Taking into account the 90-day investment horizon Visa Class A is expected to under-perform the Lixte Biotechnology. But the stock apears to be less risky and, when comparing its historical volatility, Visa Class A is 16.66 times less risky than Lixte Biotechnology. The stock trades about -0.38 of its potential returns per unit of risk. The Lixte Biotechnology Holdings is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  231.00  in Lixte Biotechnology Holdings on January 20, 2024 and sell it today you would earn a total of  104.00  from holding Lixte Biotechnology Holdings or generate 45.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Visa Class A  vs.  Lixte Biotechnology Holdings

Visa Class A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Visa Class A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Visa is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Lixte Biotechnology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lixte Biotechnology Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Lixte Biotechnology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Lixte Biotechnology

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

The idea behind Visa Class A and Lixte Biotechnology Holdings 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..