Correlation Between Mastercard and Barings BDC

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

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

Diversification Opportunities for Mastercard and Barings BDC

0.88

Correlation Coefficient

Mastercard  Barings BDC

Very poor diversification

The 3 months correlation between Mastercard and Barings is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Barings BDC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barings BDC 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 Barings BDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barings BDC has no effect on the direction of Mastercard i.e., Mastercard and Barings BDC go up and down completely randomly.

Pair Corralation between Mastercard and Barings BDC

Allowing for the 90-day total investment horizon Mastercard is expected to generate 1.23 times less return on investment than Barings BDC. In addition to that, Mastercard is 1.2 times more volatile than Barings BDC. It trades about 0.04 of its total potential returns per unit of risk. Barings BDC is currently generating about 0.07 per unit of volatility. If you would invest  924.00  in Barings BDC on December 30, 2024 and sell it today you would earn a total of  37.00  from holding Barings BDC or generate 4.0% return on investment over 90 days.

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

Mastercard  vs.  Barings BDC

Mastercard

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Mastercard is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Barings BDC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Barings BDC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Barings BDC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Mastercard and Barings BDC

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

The idea behind Mastercard and Barings BDC 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.