Correlation Between Mastercard and Origin Materials

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

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

Diversification Opportunities for Mastercard and Origin Materials

-0.79

Correlation Coefficient

Mastercard  Origin Materials

Pay attention - limited upside

The 3 months correlation between Mastercard and Origin is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Origin Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Materials 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 Origin Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Origin Materials has no effect on the direction of Mastercard i.e., Mastercard and Origin Materials go up and down completely randomly.

Pair Corralation between Mastercard and Origin Materials

Allowing for the 90-day total investment horizon Mastercard is expected to generate 2.79 times less return on investment than Origin Materials. But when comparing it to its historical volatility, Mastercard is 6.9 times less risky than Origin Materials. It trades about 0.1 of its potential returns per unit of risk. Origin Materials is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  84.00  in Origin Materials on September 21, 2024 and sell it today you would earn a total of  13.00  from holding Origin Materials or generate 15.48% return on investment over 90 days.

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

Mastercard  vs.  Origin Materials

Mastercard

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 7 (%) 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 recent stock price disturbance, may contribute to short-term losses for the investors.

Origin Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Origin Materials 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 technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Mastercard and Origin Materials

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

The idea behind Mastercard and Origin Materials 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.