Correlation Between Mastercard and LatAmGrowth SPAC

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

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

Diversification Opportunities for Mastercard and LatAmGrowth SPAC

0.86

Correlation Coefficient

Mastercard  LatAmGrowth SPAC

Very poor diversification

The 3 months correlation between Mastercard and LatAmGrowth is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and LatAmGrowth SPAC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LatAmGrowth SPAC 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 LatAmGrowth SPAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LatAmGrowth SPAC has no effect on the direction of Mastercard i.e., Mastercard and LatAmGrowth SPAC go up and down completely randomly.

Pair Corralation between Mastercard and LatAmGrowth SPAC

Allowing for the 90-day total investment horizon Mastercard is expected to generate 11.93 times more return on investment than LatAmGrowth SPAC. However, Mastercard is 11.93 times more volatile than LatAmGrowth SPAC. It trades about 0.17 of its potential returns per unit of risk. LatAmGrowth SPAC is currently generating about 0.29 per unit of risk. If you would invest  48,148  in Mastercard on September 3, 2024 and sell it today you would earn a total of  5,146  from holding Mastercard or generate 10.69% return on investment over 90 days.

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

Mastercard  vs.  LatAmGrowth SPAC

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.

LatAmGrowth SPAC

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LatAmGrowth SPAC are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, LatAmGrowth SPAC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Mastercard and LatAmGrowth SPAC

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

The idea behind Mastercard and LatAmGrowth SPAC 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.