Correlation Between Mastercard and Metal Sky

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

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

Diversification Opportunities for Mastercard and Metal Sky

-0.38

Correlation Coefficient

Mastercard  Metal Sky

Very good diversification

The 3 months correlation between Mastercard and Metal is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Metal Sky Star in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metal Sky Star 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 Metal Sky. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metal Sky Star has no effect on the direction of Mastercard i.e., Mastercard and Metal Sky go up and down completely randomly.

Pair Corralation between Mastercard and Metal Sky

Allowing for the 90-day total investment horizon Mastercard is expected to generate 18.43 times less return on investment than Metal Sky. But when comparing it to its historical volatility, Mastercard is 19.64 times less risky than Metal Sky. It trades about 0.14 of its potential returns per unit of risk. Metal Sky Star is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  6.00  in Metal Sky Star on September 13, 2024 and sell it today you would earn a total of  1.00  from holding Metal Sky Star or generate 16.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	38.1%
Values	Daily Returns

Mastercard  vs.  Metal Sky Star

Mastercard

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Mastercard may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Metal Sky Star

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Metal Sky Star are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Metal Sky reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mastercard and Metal Sky

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

The idea behind Mastercard and Metal Sky Star 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 Stocks Directory module to find actively traded stocks across global markets.