Correlation Between Mastercard and Brown Brown

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

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

Diversification Opportunities for Mastercard and Brown Brown

0.8

Correlation Coefficient

Mastercard  Brown Brown

Very poor diversification

The 3 months correlation between Mastercard and Brown is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Brown Brown in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Brown 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 Brown Brown. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Brown has no effect on the direction of Mastercard i.e., Mastercard and Brown Brown go up and down completely randomly.

Pair Corralation between Mastercard and Brown Brown

Assuming the 90 days horizon Mastercard is expected to generate 0.81 times more return on investment than Brown Brown. However, Mastercard is 1.23 times less risky than Brown Brown. It trades about 0.19 of its potential returns per unit of risk. Brown Brown is currently generating about 0.09 per unit of risk. If you would invest  43,901  in Mastercard on September 27, 2024 and sell it today you would earn a total of  6,719  from holding Mastercard or generate 15.3% return on investment over 90 days.

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

Mastercard  vs.  Brown Brown

Mastercard

Risk-Adjusted Performance

15 of 100

Good

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

Brown Brown

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brown Brown are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Brown Brown may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Mastercard and Brown Brown

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

The idea behind Mastercard and Brown Brown 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.