Correlation Between Mastercard and FS Credit

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

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

Diversification Opportunities for Mastercard and FS Credit

0.19

Correlation Coefficient

Mastercard  FS Credit

Average diversification

The 3 months correlation between Mastercard and FSCO is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and FS Credit Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FS Credit Opportunities 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 FS Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FS Credit Opportunities has no effect on the direction of Mastercard i.e., Mastercard and FS Credit go up and down completely randomly.

Pair Corralation between Mastercard and FS Credit

Allowing for the 90-day total investment horizon Mastercard is expected to generate 2.37 times less return on investment than FS Credit. In addition to that, Mastercard is 1.46 times more volatile than FS Credit Opportunities. It trades about 0.04 of its total potential returns per unit of risk. FS Credit Opportunities is currently generating about 0.15 per unit of volatility. If you would invest  653.00  in FS Credit Opportunities on December 28, 2024 and sell it today you would earn a total of  54.00  from holding FS Credit Opportunities or generate 8.27% return on investment over 90 days.

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

Mastercard  vs.  FS Credit Opportunities

Mastercard

Risk-Adjusted Performance

OK

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.

FS Credit Opportunities

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FS Credit Opportunities are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, FS Credit may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Mastercard and FS Credit

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

The idea behind Mastercard and FS Credit Opportunities 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.