Correlation Between Mastercard Incorporated and Financiera Independencia

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

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

Diversification Opportunities for Mastercard Incorporated and Financiera Independencia

-0.84

Correlation Coefficient

Mastercard Incorporated  Financiera Independencia

Pay attention - limited upside

The 3 months correlation between Mastercard and Financiera is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard Incorporated and Financiera Independencia SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financiera Independencia 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 Financiera Independencia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financiera Independencia has no effect on the direction of Mastercard Incorporated i.e., Mastercard Incorporated and Financiera Independencia go up and down completely randomly.

Pair Corralation between Mastercard Incorporated and Financiera Independencia

Assuming the 90 days horizon Mastercard Incorporated is expected to generate 0.97 times more return on investment than Financiera Independencia. However, Mastercard Incorporated is 1.03 times less risky than Financiera Independencia. It trades about 0.15 of its potential returns per unit of risk. Financiera Independencia SAB is currently generating about -0.15 per unit of risk. If you would invest  937,187  in Mastercard Incorporated on September 24, 2024 and sell it today you would earn a total of  120,939  from holding Mastercard Incorporated or generate 12.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Mastercard Incorporated  vs.  Financiera Independencia SAB

Mastercard Incorporated

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard Incorporated are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Mastercard Incorporated showed solid returns over the last few months and may actually be approaching a breakup point.

Financiera Independencia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Financiera Independencia SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Mastercard Incorporated and Financiera Independencia

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

The idea behind Mastercard Incorporated and Financiera Independencia SAB 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.