Correlation Between Apple and Mastercard Incorporated

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Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and Mastercard Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Mastercard Incorporated, you can compare the effects of market volatilities on Apple 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 Apple with a short position of Mastercard Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Mastercard Incorporated.

Diversification Opportunities for Apple and Mastercard Incorporated

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Apple and Mastercard is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Mastercard Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard Incorporated and Apple 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 Apple Inc 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 Apple i.e., Apple and Mastercard Incorporated go up and down completely randomly.

Pair Corralation between Apple and Mastercard Incorporated

Assuming the 90 days trading horizon Apple Inc is expected to generate 1.15 times more return on investment than Mastercard Incorporated. However, Apple is 1.15 times more volatile than Mastercard Incorporated. It trades about 0.22 of its potential returns per unit of risk. Mastercard Incorporated is currently generating about 0.18 per unit of risk. If you would invest  20,236  in Apple Inc on October 8, 2024 and sell it today you would earn a total of  3,434  from holding Apple Inc or generate 16.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Apple Inc  vs.  Mastercard Incorporated

 Performance 
       Timeline  
Apple Inc 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Apple exhibited solid returns over the last few months and may actually be approaching a breakup point.
Mastercard Incorporated 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard Incorporated are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward indicators, Mastercard Incorporated may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Apple and Mastercard Incorporated Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Apple and Mastercard Incorporated

The main advantage of trading using opposite Apple and Mastercard Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple Inc 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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