Correlation Between Mastercard and Federal Agricultural
Can any of the company-specific risk be diversified away by investing in both Mastercard and Federal Agricultural 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 Federal Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mastercard and Federal Agricultural Mortgage, you can compare the effects of market volatilities on Mastercard and Federal Agricultural 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 Federal Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mastercard and Federal Agricultural.
Diversification Opportunities for Mastercard and Federal Agricultural
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mastercard and Federal is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Federal Agricultural Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Agricultural 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 Federal Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Agricultural has no effect on the direction of Mastercard i.e., Mastercard and Federal Agricultural go up and down completely randomly.
Pair Corralation between Mastercard and Federal Agricultural
Assuming the 90 days trading horizon Mastercard is expected to generate 1.63 times less return on investment than Federal Agricultural. But when comparing it to its historical volatility, Mastercard is 1.96 times less risky than Federal Agricultural. It trades about 0.08 of its potential returns per unit of risk. Federal Agricultural Mortgage is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 10,396 in Federal Agricultural Mortgage on August 29, 2024 and sell it today you would earn a total of 9,204 from holding Federal Agricultural Mortgage or generate 88.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mastercard vs. Federal Agricultural Mortgage
Performance |
| Timeline |
| Mastercard |
| Federal Agricultural |
Mastercard and Federal Agricultural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mastercard and Federal Agricultural
The main advantage of trading using opposite Mastercard and Federal Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mastercard position performs unexpectedly, Federal Agricultural 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 Federal Agricultural will offset losses from the drop in Federal Agricultural's long position.| Mastercard vs. Visa Inc | Mastercard vs. Visa Inc | Mastercard vs. Mastercard | Mastercard vs. American Express |
| Federal Agricultural vs. Visa Inc | Federal Agricultural vs. Visa Inc | Federal Agricultural vs. Mastercard | Federal Agricultural vs. Mastercard |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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