Correlation Between Mastercard and Givaudan

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

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

Diversification Opportunities for Mastercard and Givaudan

-0.83

Correlation Coefficient

Mastercard  Givaudan

Pay attention - limited upside

The 3 months correlation between Mastercard and Givaudan is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Givaudan SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Givaudan SA ADR 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 Givaudan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Givaudan SA ADR has no effect on the direction of Mastercard i.e., Mastercard and Givaudan go up and down completely randomly.

Pair Corralation between Mastercard and Givaudan

Allowing for the 90-day total investment horizon Mastercard is expected to generate 0.78 times more return on investment than Givaudan. However, Mastercard is 1.28 times less risky than Givaudan. It trades about 0.08 of its potential returns per unit of risk. Givaudan SA ADR is currently generating about 0.05 per unit of risk. If you would invest  35,294  in Mastercard on September 3, 2024 and sell it today you would earn a total of  18,000  from holding Mastercard or generate 51.0% return on investment over 90 days.

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

Mastercard  vs.  Givaudan SA ADR

Mastercard

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 13 (%) 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 January 2025.

Givaudan SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Givaudan SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Mastercard and Givaudan

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

The idea behind Mastercard and Givaudan SA ADR 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.