Correlation Between Mastercard and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both Mastercard and Wells Fargo 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 Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mastercard and Wells Fargo Co, you can compare the effects of market volatilities on Mastercard and Wells Fargo 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 Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mastercard and Wells Fargo.
Diversification Opportunities for Mastercard and Wells Fargo
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Mastercard and Wells is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Wells Fargo Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo 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 Wells Fargo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wells Fargo has no effect on the direction of Mastercard i.e., Mastercard and Wells Fargo go up and down completely randomly.
Pair Corralation between Mastercard and Wells Fargo
Allowing for the 90-day total investment horizon Mastercard is expected to generate 4.66 times more return on investment than Wells Fargo. However, Mastercard is 4.66 times more volatile than Wells Fargo Co. It trades about 0.3 of its potential returns per unit of risk. Wells Fargo Co is currently generating about 0.13 per unit of risk. If you would invest 49,959 in Mastercard on September 1, 2024 and sell it today you would earn a total of 3,335 from holding Mastercard or generate 6.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Mastercard vs. Wells Fargo Co
Performance |
| Timeline |
| Mastercard |
| Wells Fargo |
Mastercard and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mastercard and Wells Fargo
The main advantage of trading using opposite Mastercard and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mastercard position performs unexpectedly, Wells Fargo 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 Wells Fargo will offset losses from the drop in Wells Fargo's long position.| Mastercard vs. American Express | Mastercard vs. PayPal Holdings | Mastercard vs. Upstart Holdings | Mastercard vs. Capital One Financial |
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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