Correlation Between Mastercard and SWK Holdings

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

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

Diversification Opportunities for Mastercard and SWK Holdings

-0.45

Correlation Coefficient

Mastercard  SWK Holdings

Very good diversification

The 3 months correlation between Mastercard and SWK is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and SWK Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SWK Holdings Corp 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 SWK Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SWK Holdings Corp has no effect on the direction of Mastercard i.e., Mastercard and SWK Holdings go up and down completely randomly.

Pair Corralation between Mastercard and SWK Holdings

Allowing for the 90-day total investment horizon Mastercard is expected to generate 0.67 times more return on investment than SWK Holdings. However, Mastercard is 1.49 times less risky than SWK Holdings. It trades about 0.08 of its potential returns per unit of risk. SWK Holdings Corp is currently generating about -0.01 per unit of risk. If you would invest  42,656  in Mastercard on October 9, 2024 and sell it today you would earn a total of  8,484  from holding Mastercard or generate 19.89% return on investment over 90 days.

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

Mastercard  vs.  SWK Holdings Corp

Mastercard

Risk-Adjusted Performance

3 of 100

Insignificant

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.

SWK Holdings Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SWK Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward-looking signals, SWK Holdings is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Mastercard and SWK Holdings

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

The idea behind Mastercard and SWK Holdings Corp 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.