Correlation Between Mastercard and Crescent Capital

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

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

Diversification Opportunities for Mastercard and Crescent Capital

0.52

Correlation Coefficient

Mastercard  Crescent Capital

Very weak diversification

The 3 months correlation between Mastercard and Crescent is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Crescent Capital BDC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Capital 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 Crescent Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Capital BDC has no effect on the direction of Mastercard i.e., Mastercard and Crescent Capital go up and down completely randomly.

Pair Corralation between Mastercard and Crescent Capital

Allowing for the 90-day total investment horizon Mastercard is expected to generate 0.97 times more return on investment than Crescent Capital. However, Mastercard is 1.03 times less risky than Crescent Capital. It trades about 0.1 of its potential returns per unit of risk. Crescent Capital BDC is currently generating about -0.07 per unit of risk. If you would invest  53,214  in Mastercard on November 29, 2024 and sell it today you would earn a total of  3,298  from holding Mastercard or generate 6.2% return on investment over 90 days.

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

Mastercard  vs.  Crescent Capital BDC

Mastercard

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 7 (%) 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 March 2025.

Crescent Capital BDC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Crescent Capital BDC has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Crescent Capital is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Mastercard and Crescent Capital

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

The idea behind Mastercard and Crescent Capital 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.