Correlation Between Mastercard and Federated Investors
Can any of the company-specific risk be diversified away by investing in both Mastercard and Federated Investors 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 and Federated Investors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mastercard and Federated Investors B, you can compare the effects of market volatilities on Mastercard and Federated Investors 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 with a short position of Federated Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mastercard and Federated Investors.
Diversification Opportunities for Mastercard and Federated Investors
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Mastercard and Federated is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Federated Investors B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Investors and Mastercard 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 are associated (or correlated) with Federated Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Investors has no effect on the direction of Mastercard i.e., Mastercard and Federated Investors go up and down completely randomly.
Pair Corralation between Mastercard and Federated Investors
Allowing for the 90-day total investment horizon Mastercard is expected to generate 0.64 times more return on investment than Federated Investors. However, Mastercard is 1.57 times less risky than Federated Investors. It trades about -0.3 of its potential returns per unit of risk. Federated Investors B is currently generating about -0.31 per unit of risk. If you would invest 47,774 in Mastercard on February 1, 2024 and sell it today you would lose (2,654) from holding Mastercard or give up 5.56% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Mastercard vs. Federated Investors B
Performance |
Timeline |
Mastercard |
Federated Investors |
Mastercard and Federated Investors Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Mastercard and Federated Investors
The main advantage of trading using opposite Mastercard and Federated Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mastercard position performs unexpectedly, Federated Investors 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 Federated Investors will offset losses from the drop in Federated Investors' long position.Mastercard vs. American Express | Mastercard vs. Capital One Financial | Mastercard vs. Upstart HoldingsInc | Mastercard vs. Ally Financial |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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