Correlation Between Financeira Alfa and Mastercard Incorporated

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

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

Diversification Opportunities for Financeira Alfa and Mastercard Incorporated

0.0

Correlation Coefficient

Financeira Alfa  Mastercard Incorporated

Pay attention - limited upside

The 3 months correlation between Financeira and Mastercard is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Financeira Alfa SA and Mastercard Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard Incorporated and Financeira Alfa 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 Financeira Alfa SA 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 Financeira Alfa i.e., Financeira Alfa and Mastercard Incorporated go up and down completely randomly.

Pair Corralation between Financeira Alfa and Mastercard Incorporated

If you would invest  8,736  in Mastercard Incorporated on September 16, 2024 and sell it today you would earn a total of  1,691  from holding Mastercard Incorporated or generate 19.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Financeira Alfa SA  vs.  Mastercard Incorporated

Financeira Alfa SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Financeira Alfa SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Financeira Alfa 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

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard Incorporated are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Mastercard Incorporated sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Financeira Alfa and Mastercard Incorporated

The main advantage of trading using opposite Financeira Alfa and Mastercard Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financeira Alfa 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 Financeira Alfa SA 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.