Correlation Between Mastercard and Nidec

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

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

Diversification Opportunities for Mastercard and Nidec

-0.33

Correlation Coefficient

Mastercard  Nidec

Very good diversification

The 3 months correlation between Mastercard and Nidec is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Nidec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nidec 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 Nidec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nidec has no effect on the direction of Mastercard i.e., Mastercard and Nidec go up and down completely randomly.

Pair Corralation between Mastercard and Nidec

Assuming the 90 days horizon Mastercard is expected to generate 0.32 times more return on investment than Nidec. However, Mastercard is 3.15 times less risky than Nidec. It trades about 0.04 of its potential returns per unit of risk. Nidec is currently generating about -0.07 per unit of risk. If you would invest  50,270  in Mastercard on September 27, 2024 and sell it today you would earn a total of  350.00  from holding Mastercard or generate 0.7% return on investment over 90 days.

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

Mastercard  vs.  Nidec

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.

Nidec

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nidec are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, Nidec reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mastercard and Nidec

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

The idea behind Mastercard and Nidec 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.