Correlation Between Mastercard and CLP Holdings

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

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

Diversification Opportunities for Mastercard and CLP Holdings

-0.67

Correlation Coefficient

Mastercard  CLP Holdings

Excellent diversification

The 3 months correlation between Mastercard and CLP is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and CLP Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CLP Holdings 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 CLP Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CLP Holdings has no effect on the direction of Mastercard i.e., Mastercard and CLP Holdings go up and down completely randomly.

Pair Corralation between Mastercard and CLP Holdings

Allowing for the 90-day total investment horizon Mastercard is expected to generate 0.74 times more return on investment than CLP Holdings. However, Mastercard is 1.34 times less risky than CLP Holdings. It trades about 0.1 of its potential returns per unit of risk. CLP Holdings is currently generating about 0.04 per unit of risk. If you would invest  39,482  in Mastercard on October 11, 2024 and sell it today you would earn a total of  12,158  from holding Mastercard or generate 30.79% return on investment over 90 days.

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

Mastercard  vs.  CLP Holdings

Mastercard

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 4 (%) 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.

CLP Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CLP Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, CLP Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mastercard and CLP Holdings

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

The idea behind Mastercard and CLP Holdings 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.