Correlation Between Mastercard Incorporated and OPKO HEALTH

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

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

Diversification Opportunities for Mastercard Incorporated and OPKO HEALTH

0.8

Correlation Coefficient

Mastercard Incorporated  OPKO HEALTH

Very poor diversification

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

Pair Corralation between Mastercard Incorporated and OPKO HEALTH

Assuming the 90 days trading horizon Mastercard Incorporated is expected to generate 0.86 times more return on investment than OPKO HEALTH. However, Mastercard Incorporated is 1.17 times less risky than OPKO HEALTH. It trades about 0.13 of its potential returns per unit of risk. OPKO HEALTH is currently generating about 0.07 per unit of risk. If you would invest  45,620  in Mastercard Incorporated on October 10, 2024 and sell it today you would earn a total of  3,975  from holding Mastercard Incorporated or generate 8.71% return on investment over 90 days.

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

Mastercard Incorporated  vs.  OPKO HEALTH

Mastercard Incorporated

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard Incorporated are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain forward indicators, Mastercard Incorporated may actually be approaching a critical reversion point that can send shares even higher in February 2025.

OPKO HEALTH

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in OPKO HEALTH are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, OPKO HEALTH is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Mastercard Incorporated and OPKO HEALTH

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

The idea behind Mastercard Incorporated and OPKO HEALTH 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.