Correlation Between Mastercard Incorporated and Mastercard

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

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

Diversification Opportunities for Mastercard Incorporated and Mastercard

0.99

Correlation Coefficient

Mastercard Incorporated  Mastercard

No risk reduction

The 3 months correlation between Mastercard and Mastercard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard Incorporated and Mastercard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard and Mastercard Incorporated 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 Mastercard Incorporated 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 Mastercard Incorporated i.e., Mastercard Incorporated and Mastercard go up and down completely randomly.

Pair Corralation between Mastercard Incorporated and Mastercard

Assuming the 90 days trading horizon Mastercard Incorporated is expected to generate 1.02 times less return on investment than Mastercard. But when comparing it to its historical volatility, Mastercard Incorporated is 1.02 times less risky than Mastercard. It trades about 0.18 of its potential returns per unit of risk. Mastercard is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  39,527  in Mastercard on October 22, 2024 and sell it today you would earn a total of  11,543  from holding Mastercard or generate 29.2% return on investment over 90 days.

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

Mastercard Incorporated  vs.  Mastercard

Mastercard Incorporated

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard Incorporated are ranked lower than 8 (%) 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.

Mastercard

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Mastercard may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Mastercard Incorporated and Mastercard

The main advantage of trading using opposite Mastercard Incorporated and Mastercard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mastercard Incorporated 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 Mastercard Incorporated 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.