Correlation Between 70082LAB3 and Mastercard

Can any of the company-specific risk be diversified away by investing in both 70082LAB3 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 70082LAB3 and Mastercard into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between US70082LAB36 and Mastercard, you can compare the effects of market volatilities on 70082LAB3 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 70082LAB3 with a short position of Mastercard. Check out your portfolio center. Please also check ongoing floating volatility patterns of 70082LAB3 and Mastercard.

Diversification Opportunities for 70082LAB3 and Mastercard

0.05

Correlation Coefficient

70082LAB3  Mastercard

Significant diversification

The 3 months correlation between 70082LAB3 and Mastercard is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding US70082LAB36 and Mastercard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard and 70082LAB3 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 US70082LAB36 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 70082LAB3 i.e., 70082LAB3 and Mastercard go up and down completely randomly.

Pair Corralation between 70082LAB3 and Mastercard

Assuming the 90 days trading horizon US70082LAB36 is expected to under-perform the Mastercard. In addition to that, 70082LAB3 is 7.4 times more volatile than Mastercard. It trades about -0.22 of its total potential returns per unit of risk. Mastercard is currently generating about -0.46 per unit of volatility. If you would invest  47,885  in Mastercard on February 6, 2024 and sell it today you would lose (3,527) from holding Mastercard or give up 7.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	52.38%
Values	Daily Returns

US70082LAB36  vs.  Mastercard

US70082LAB36

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US70082LAB36 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for US70082LAB36 investors.

Mastercard

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mastercard 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with 70082LAB3 and Mastercard

The main advantage of trading using opposite 70082LAB3 and Mastercard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 70082LAB3 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 US70082LAB36 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.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.