Correlation Between Ross Stores and Mastercard Incorporated

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

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

Diversification Opportunities for Ross Stores and Mastercard Incorporated

0.46

Correlation Coefficient

Ross Stores  Mastercard Incorporated

Very weak diversification

The 3 months correlation between Ross and Mastercard is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and Mastercard Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard Incorporated and Ross Stores 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 Ross Stores are associated (or correlated) with Mastercard Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard Incorporated has no effect on the direction of Ross Stores i.e., Ross Stores and Mastercard Incorporated go up and down completely randomly.

Pair Corralation between Ross Stores and Mastercard Incorporated

Assuming the 90 days trading horizon Ross Stores is expected to under-perform the Mastercard Incorporated. In addition to that, Ross Stores is 1.59 times more volatile than Mastercard Incorporated. It trades about -0.3 of its total potential returns per unit of risk. Mastercard Incorporated is currently generating about 0.1 per unit of volatility. If you would invest  1,077,871  in Mastercard Incorporated on December 2, 2024 and sell it today you would earn a total of  67,879  from holding Mastercard Incorporated or generate 6.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	32.79%
Values	Daily Returns

Ross Stores  vs.  Mastercard Incorporated

Ross Stores

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ross Stores 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 basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Mastercard Incorporated

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard Incorporated are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Mastercard Incorporated may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ross Stores and Mastercard Incorporated

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

The idea behind Ross Stores and Mastercard Incorporated 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.