Correlation Between Beacon Roofing and Mastercard

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

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

Diversification Opportunities for Beacon Roofing and Mastercard

0.78

Correlation Coefficient

Beacon Roofing  Mastercard

Poor diversification

The 3 months correlation between Beacon and Mastercard is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Beacon Roofing Supply and Mastercard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard and Beacon Roofing 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 Beacon Roofing Supply are associated (or correlated) with Mastercard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard has no effect on the direction of Beacon Roofing i.e., Beacon Roofing and Mastercard go up and down completely randomly.

Pair Corralation between Beacon Roofing and Mastercard

Given the investment horizon of 90 days Beacon Roofing Supply is expected to under-perform the Mastercard. In addition to that, Beacon Roofing is 1.35 times more volatile than Mastercard. It trades about -0.3 of its total potential returns per unit of risk. Mastercard is currently generating about -0.11 per unit of volatility. If you would invest  52,282  in Mastercard on October 9, 2024 and sell it today you would lose (1,089) from holding Mastercard or give up 2.08% of portfolio value over 90 days.

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

Beacon Roofing Supply  vs.  Mastercard

Beacon Roofing Supply

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Beacon Roofing Supply are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Beacon Roofing may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Mastercard

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Mastercard is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Beacon Roofing and Mastercard

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

The idea behind Beacon Roofing Supply and Mastercard 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.