Correlation Between Apple and Mastercard

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

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

Diversification Opportunities for Apple and Mastercard

-0.63

Correlation Coefficient

Apple  Mastercard

Excellent diversification

The 3 months correlation between Apple and Mastercard is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Mastercard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard and Apple 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 Apple Inc 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 has no effect on the direction of Apple i.e., Apple and Mastercard go up and down completely randomly.

Pair Corralation between Apple and Mastercard

Assuming the 90 days trading horizon Apple Inc is expected to generate 1.9 times more return on investment than Mastercard. However, Apple is 1.9 times more volatile than Mastercard. It trades about 0.07 of its potential returns per unit of risk. Mastercard is currently generating about -0.27 per unit of risk. If you would invest  15,702  in Apple Inc on January 29, 2024 and sell it today you would earn a total of  250.00  from holding Apple Inc or generate 1.59% return on investment over 90 days.

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

Apple Inc  vs.  Mastercard

Apple Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Mastercard

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Mastercard may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Apple and Mastercard

The main advantage of trading using opposite Apple and Mastercard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple Inc and Mastercard 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.