Correlation Between Mastercard Incorporated and Applied Materials
Can any of the company-specific risk be diversified away by investing in both Mastercard Incorporated and Applied Materials 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 Incorporated and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mastercard Incorporated and Applied Materials, you can compare the effects of market volatilities on Mastercard Incorporated and Applied Materials 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 Incorporated with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mastercard Incorporated and Applied Materials.
Diversification Opportunities for Mastercard Incorporated and Applied Materials
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Mastercard and Applied is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard Incorporated and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Mastercard Incorporated 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 Incorporated are associated (or correlated) with Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of Mastercard Incorporated i.e., Mastercard Incorporated and Applied Materials go up and down completely randomly.
Pair Corralation between Mastercard Incorporated and Applied Materials
Assuming the 90 days horizon Mastercard Incorporated is expected to generate 1.32 times less return on investment than Applied Materials. But when comparing it to its historical volatility, Mastercard Incorporated is 2.01 times less risky than Applied Materials. It trades about 0.1 of its potential returns per unit of risk. Applied Materials is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 203,259 in Applied Materials on August 31, 2024 and sell it today you would earn a total of 146,096 from holding Applied Materials or generate 71.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mastercard Incorporated vs. Applied Materials
Performance |
| Timeline |
| Mastercard Incorporated |
| Applied Materials |
Mastercard Incorporated and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mastercard Incorporated and Applied Materials
The main advantage of trading using opposite Mastercard Incorporated and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mastercard Incorporated position performs unexpectedly, Applied Materials 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 Applied Materials will offset losses from the drop in Applied Materials' long position.| Mastercard Incorporated vs. Ameriprise Financial | Mastercard Incorporated vs. Grupo Sports World | Mastercard Incorporated vs. Applied Materials | Mastercard Incorporated vs. Hoteles City Express |
| Applied Materials vs. Micron Technology | Applied Materials vs. First Republic Bank | Applied Materials vs. Grupo Sports World | Applied Materials vs. Grupo Carso SAB |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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