Correlation Between Mastercard and Better Home
Can any of the company-specific risk be diversified away by investing in both Mastercard and Better Home 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 Better Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mastercard and Better Home Finance, you can compare the effects of market volatilities on Mastercard and Better Home 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 Better Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mastercard and Better Home.
Diversification Opportunities for Mastercard and Better Home
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Mastercard and Better is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Better Home Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Better Home Finance 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 Better Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Better Home Finance has no effect on the direction of Mastercard i.e., Mastercard and Better Home go up and down completely randomly.
Pair Corralation between Mastercard and Better Home
Allowing for the 90-day total investment horizon Mastercard is expected to generate 1.62 times less return on investment than Better Home. But when comparing it to its historical volatility, Mastercard is 12.84 times less risky than Better Home. It trades about 0.08 of its potential returns per unit of risk. Better Home Finance is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 50,100 in Better Home Finance on September 3, 2024 and sell it today you would lose (48,523) from holding Better Home Finance or give up 96.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mastercard vs. Better Home Finance
Performance |
| Timeline |
| Mastercard |
| Better Home Finance |
Mastercard and Better Home Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mastercard and Better Home
The main advantage of trading using opposite Mastercard and Better Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mastercard position performs unexpectedly, Better Home 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 Better Home will offset losses from the drop in Better Home's long position.| Mastercard vs. American Express | Mastercard vs. Capital One Financial | Mastercard vs. Upstart Holdings | Mastercard vs. Ally Financial |
| Better Home vs. Citizens | Better Home vs. Employers Holdings | Better Home vs. Maanshan Iron Steel | Better Home vs. GoHealth |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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