Correlation Between Mastercard and Ares Acquisition

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

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

Diversification Opportunities for Mastercard and Ares Acquisition

0.43

Correlation Coefficient

Mastercard  Ares Acquisition

Very weak diversification

The 3 months correlation between Mastercard and Ares is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Ares Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Acquisition 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 Ares Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Acquisition has no effect on the direction of Mastercard i.e., Mastercard and Ares Acquisition go up and down completely randomly.

Pair Corralation between Mastercard and Ares Acquisition

Allowing for the 90-day total investment horizon Mastercard is expected to under-perform the Ares Acquisition. In addition to that, Mastercard is 9.15 times more volatile than Ares Acquisition. It trades about -0.03 of its total potential returns per unit of risk. Ares Acquisition is currently generating about 0.19 per unit of volatility. If you would invest  1,093  in Ares Acquisition on October 6, 2024 and sell it today you would earn a total of  4.00  from holding Ares Acquisition or generate 0.37% return on investment over 90 days.

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

Mastercard  vs.  Ares Acquisition

Mastercard

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mastercard may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Ares Acquisition

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Acquisition are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Ares Acquisition is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Mastercard and Ares Acquisition

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

The idea behind Mastercard and Ares Acquisition 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.