Correlation Between Mastercard Incorporated and Apartment Investment

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

By analyzing existing cross correlation between Mastercard Incorporated and Apartment Investment and, you can compare the effects of market volatilities on Mastercard Incorporated and Apartment Investment 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 Incorporated with a short position of Apartment Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mastercard Incorporated and Apartment Investment.

Diversification Opportunities for Mastercard Incorporated and Apartment Investment

0.61

Correlation Coefficient

Mastercard Incorporated  Apartment Investment

Poor diversification

The 3 months correlation between Mastercard and Apartment is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard Incorporated and Apartment Investment and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apartment Investment and and Mastercard Incorporated 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 Incorporated are associated (or correlated) with Apartment Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apartment Investment and has no effect on the direction of Mastercard Incorporated i.e., Mastercard Incorporated and Apartment Investment go up and down completely randomly.

Pair Corralation between Mastercard Incorporated and Apartment Investment

Assuming the 90 days trading horizon Mastercard Incorporated is expected to generate 0.86 times more return on investment than Apartment Investment. However, Mastercard Incorporated is 1.16 times less risky than Apartment Investment. It trades about 0.19 of its potential returns per unit of risk. Apartment Investment and is currently generating about 0.06 per unit of risk. If you would invest  8,848  in Mastercard Incorporated on September 17, 2024 and sell it today you would earn a total of  1,632  from holding Mastercard Incorporated or generate 18.44% return on investment over 90 days.

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

Mastercard Incorporated  vs.  Apartment Investment and

Mastercard Incorporated

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard Incorporated are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Mastercard Incorporated sustained solid returns over the last few months and may actually be approaching a breakup point.

Apartment Investment and

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Apartment Investment and are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, Apartment Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mastercard Incorporated and Apartment Investment

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

The idea behind Mastercard Incorporated and Apartment Investment and 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.