Correlation Between Mastercard and Newtek Business

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

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

Diversification Opportunities for Mastercard and Newtek Business

0.7

Correlation Coefficient

Mastercard  Newtek Business

Poor diversification

The 3 months correlation between Mastercard and Newtek is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Newtek Business Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newtek Business Services and Mastercard 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 are associated (or correlated) with Newtek Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newtek Business Services has no effect on the direction of Mastercard i.e., Mastercard and Newtek Business go up and down completely randomly.

Pair Corralation between Mastercard and Newtek Business

Assuming the 90 days horizon Mastercard is expected to generate 0.61 times more return on investment than Newtek Business. However, Mastercard is 1.63 times less risky than Newtek Business. It trades about -0.12 of its potential returns per unit of risk. Newtek Business Services is currently generating about -0.25 per unit of risk. If you would invest  50,443  in Mastercard on October 15, 2024 and sell it today you would lose (1,163) from holding Mastercard or give up 2.31% of portfolio value over 90 days.

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

Mastercard  vs.  Newtek Business Services

Mastercard

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Mastercard is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Newtek Business Services

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Newtek Business Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Newtek Business may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Mastercard and Newtek Business

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

The idea behind Mastercard and Newtek Business Services 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.

Check out your portfolio center.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.