Correlation Between AIR PRODCHEMICALS and Mastercard Incorporated

Can any of the company-specific risk be diversified away by investing in both AIR PRODCHEMICALS and Mastercard Incorporated 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 AIR PRODCHEMICALS and Mastercard Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AIR PRODCHEMICALS and Mastercard Incorporated, you can compare the effects of market volatilities on AIR PRODCHEMICALS and Mastercard Incorporated 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 AIR PRODCHEMICALS with a short position of Mastercard Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIR PRODCHEMICALS and Mastercard Incorporated.

Diversification Opportunities for AIR PRODCHEMICALS and Mastercard Incorporated

0.55

Correlation Coefficient

AIR PRODCHEMICALS  Mastercard Incorporated

Very weak diversification

The 3 months correlation between AIR and Mastercard is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding AIR PRODCHEMICALS and Mastercard Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard Incorporated and AIR PRODCHEMICALS 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 AIR PRODCHEMICALS are associated (or correlated) with Mastercard Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard Incorporated has no effect on the direction of AIR PRODCHEMICALS i.e., AIR PRODCHEMICALS and Mastercard Incorporated go up and down completely randomly.

Pair Corralation between AIR PRODCHEMICALS and Mastercard Incorporated

Assuming the 90 days trading horizon AIR PRODCHEMICALS is expected to under-perform the Mastercard Incorporated. But the stock apears to be less risky and, when comparing its historical volatility, AIR PRODCHEMICALS is 1.12 times less risky than Mastercard Incorporated. The stock trades about -0.02 of its potential returns per unit of risk. The Mastercard Incorporated is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  45,044  in Mastercard Incorporated on October 8, 2024 and sell it today you would earn a total of  4,751  from holding Mastercard Incorporated or generate 10.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

AIR PRODCHEMICALS  vs.  Mastercard Incorporated

AIR PRODCHEMICALS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AIR PRODCHEMICALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AIR PRODCHEMICALS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Mastercard Incorporated

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard Incorporated are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile forward indicators, Mastercard Incorporated may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with AIR PRODCHEMICALS and Mastercard Incorporated

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

The idea behind AIR PRODCHEMICALS and Mastercard Incorporated 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..