Correlation Between Western Sierra and MASTERCARD

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

By analyzing existing cross correlation between Western Sierra Mining and MASTERCARD INC, you can compare the effects of market volatilities on Western Sierra and MASTERCARD 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 Western Sierra with a short position of MASTERCARD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Sierra and MASTERCARD.

Diversification Opportunities for Western Sierra and MASTERCARD

0.06

Correlation Coefficient

Western Sierra  MASTERCARD

Significant diversification

The 3 months correlation between Western and MASTERCARD is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Western Sierra Mining and MASTERCARD INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MASTERCARD INC and Western Sierra 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 Western Sierra Mining are associated (or correlated) with MASTERCARD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MASTERCARD INC has no effect on the direction of Western Sierra i.e., Western Sierra and MASTERCARD go up and down completely randomly.

Pair Corralation between Western Sierra and MASTERCARD

Given the investment horizon of 90 days Western Sierra Mining is expected to generate 134.01 times more return on investment than MASTERCARD. However, Western Sierra is 134.01 times more volatile than MASTERCARD INC. It trades about 0.1 of its potential returns per unit of risk. MASTERCARD INC is currently generating about -0.05 per unit of risk. If you would invest  0.68  in Western Sierra Mining on December 2, 2024 and sell it today you would lose (0.65) from holding Western Sierra Mining or give up 95.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	92.31%
Values	Daily Returns

Western Sierra Mining  vs.  MASTERCARD INC

Western Sierra Mining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Sierra Mining are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Western Sierra exhibited solid returns over the last few months and may actually be approaching a breakup point.

MASTERCARD INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days MASTERCARD INC has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Western Sierra and MASTERCARD

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

The idea behind Western Sierra Mining and MASTERCARD INC 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.