Correlation Between Value Grupo and Mastercard Incorporated

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

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

Diversification Opportunities for Value Grupo and Mastercard Incorporated

-0.16

Correlation Coefficient

Value Grupo  Mastercard Incorporated

Good diversification

The 3 months correlation between Value and Mastercard is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Value Grupo Financiero and Mastercard Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard Incorporated and Value Grupo 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 Value Grupo Financiero 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 Value Grupo i.e., Value Grupo and Mastercard Incorporated go up and down completely randomly.

Pair Corralation between Value Grupo and Mastercard Incorporated

Assuming the 90 days trading horizon Value Grupo is expected to generate 21.17 times less return on investment than Mastercard Incorporated. In addition to that, Value Grupo is 2.16 times more volatile than Mastercard Incorporated. It trades about 0.0 of its total potential returns per unit of risk. Mastercard Incorporated is currently generating about 0.12 per unit of volatility. If you would invest  962,999  in Mastercard Incorporated on September 23, 2024 and sell it today you would earn a total of  95,127  from holding Mastercard Incorporated or generate 9.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Value Grupo Financiero  vs.  Mastercard Incorporated

Value Grupo Financiero

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Value Grupo Financiero has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Value Grupo is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Mastercard Incorporated

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard Incorporated are ranked lower than 9 (%) 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 January 2025.

Pair Trading with Value Grupo and Mastercard Incorporated

The main advantage of trading using opposite Value Grupo and Mastercard Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Grupo 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 Value Grupo Financiero 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..