Correlation Between Mastercard and ARMOUR Residential
Can any of the company-specific risk be diversified away by investing in both Mastercard and ARMOUR Residential 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 ARMOUR Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mastercard and ARMOUR Residential REIT, you can compare the effects of market volatilities on Mastercard and ARMOUR Residential 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 ARMOUR Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mastercard and ARMOUR Residential.
Diversification Opportunities for Mastercard and ARMOUR Residential
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Mastercard and ARMOUR is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and ARMOUR Residential REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARMOUR Residential REIT 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 ARMOUR Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARMOUR Residential REIT has no effect on the direction of Mastercard i.e., Mastercard and ARMOUR Residential go up and down completely randomly.
Pair Corralation between Mastercard and ARMOUR Residential
Allowing for the 90-day total investment horizon Mastercard is expected to generate 0.58 times more return on investment than ARMOUR Residential. However, Mastercard is 1.73 times less risky than ARMOUR Residential. It trades about 0.09 of its potential returns per unit of risk. ARMOUR Residential REIT is currently generating about 0.01 per unit of risk. If you would invest 37,964 in Mastercard on August 31, 2024 and sell it today you would earn a total of 15,274 from holding Mastercard or generate 40.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mastercard vs. ARMOUR Residential REIT
Performance |
| Timeline |
| Mastercard |
| ARMOUR Residential REIT |
Mastercard and ARMOUR Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mastercard and ARMOUR Residential
The main advantage of trading using opposite Mastercard and ARMOUR Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mastercard position performs unexpectedly, ARMOUR Residential 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 ARMOUR Residential will offset losses from the drop in ARMOUR Residential's long position.| Mastercard vs. American Express | Mastercard vs. PayPal Holdings | Mastercard vs. Upstart Holdings | Mastercard vs. Capital One Financial |
| ARMOUR Residential vs. Ellington Financial | ARMOUR Residential vs. Dynex Capital | ARMOUR Residential vs. Orchid Island Capital | ARMOUR Residential vs. Chimera 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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