Correlation Between Mastercard Incorporated and Value Grupo

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

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

Diversification Opportunities for Mastercard Incorporated and Value Grupo

0.24

Correlation Coefficient

Mastercard Incorporated  Value Grupo

Modest diversification

The 3 months correlation between Mastercard and Value is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard Incorporated and Value Grupo Financiero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Grupo Financiero 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 Value Grupo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Grupo Financiero has no effect on the direction of Mastercard Incorporated i.e., Mastercard Incorporated and Value Grupo go up and down completely randomly.

Pair Corralation between Mastercard Incorporated and Value Grupo

Assuming the 90 days horizon Mastercard Incorporated is expected to generate 0.35 times more return on investment than Value Grupo. However, Mastercard Incorporated is 2.87 times less risky than Value Grupo. It trades about 0.07 of its potential returns per unit of risk. Value Grupo Financiero is currently generating about 0.01 per unit of risk. If you would invest  698,139  in Mastercard Incorporated on October 12, 2024 and sell it today you would earn a total of  344,361  from holding Mastercard Incorporated or generate 49.33% return on investment over 90 days.

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

Mastercard Incorporated  vs.  Value Grupo Financiero

Mastercard Incorporated

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard Incorporated are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Mastercard Incorporated may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Value Grupo Financiero

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Value Grupo Financiero are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Value Grupo reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mastercard Incorporated and Value Grupo

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

The idea behind Mastercard Incorporated and Value Grupo Financiero 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.