Correlation Between Mastercard Incorporated and Advance Auto
Can any of the company-specific risk be diversified away by investing in both Mastercard Incorporated and Advance Auto 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 Advance Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mastercard Incorporated and Advance Auto Parts, you can compare the effects of market volatilities on Mastercard Incorporated and Advance Auto 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 Advance Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mastercard Incorporated and Advance Auto.
Diversification Opportunities for Mastercard Incorporated and Advance Auto
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Mastercard and Advance is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard Incorporated and Advance Auto Parts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advance Auto Parts 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 Advance Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advance Auto Parts has no effect on the direction of Mastercard Incorporated i.e., Mastercard Incorporated and Advance Auto go up and down completely randomly.
Pair Corralation between Mastercard Incorporated and Advance Auto
Assuming the 90 days trading horizon Mastercard Incorporated is expected to generate 0.4 times more return on investment than Advance Auto. However, Mastercard Incorporated is 2.5 times less risky than Advance Auto. It trades about 0.09 of its potential returns per unit of risk. Advance Auto Parts is currently generating about -0.04 per unit of risk. If you would invest 5,865 in Mastercard Incorporated on August 30, 2024 and sell it today you would earn a total of 4,135 from holding Mastercard Incorporated or generate 70.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Mastercard Incorporated vs. Advance Auto Parts
Performance |
| Timeline |
| Mastercard Incorporated |
| Advance Auto Parts |
Mastercard Incorporated and Advance Auto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mastercard Incorporated and Advance Auto
The main advantage of trading using opposite Mastercard Incorporated and Advance Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mastercard Incorporated position performs unexpectedly, Advance Auto 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 Advance Auto will offset losses from the drop in Advance Auto's long position.| Mastercard Incorporated vs. Metalrgica Riosulense SA | Mastercard Incorporated vs. GP Investments | Mastercard Incorporated vs. Healthpeak Properties | Mastercard Incorporated vs. British American Tobacco |
| Advance Auto vs. MAHLE Metal Leve | Advance Auto vs. Charter Communications | Advance Auto vs. Southwest Airlines Co | Advance Auto vs. G2D Investments |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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