Correlation Between Microsoft and Mastercard
Can any of the company-specific risk be diversified away by investing in both Microsoft and Mastercard 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 Microsoft and Mastercard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Mastercard, you can compare the effects of market volatilities on Microsoft and Mastercard 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 Microsoft with a short position of Mastercard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Mastercard.
Diversification Opportunities for Microsoft and Mastercard
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Mastercard is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Mastercard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard and Microsoft 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 Microsoft are associated (or correlated) with Mastercard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard has no effect on the direction of Microsoft i.e., Microsoft and Mastercard go up and down completely randomly.
Pair Corralation between Microsoft and Mastercard
Given the investment horizon of 90 days Microsoft is expected to generate 1.89 times less return on investment than Mastercard. But when comparing it to its historical volatility, Microsoft is 1.18 times less risky than Mastercard. It trades about 0.19 of its potential returns per unit of risk. Mastercard is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 46,345 in Mastercard on September 1, 2024 and sell it today you would earn a total of 4,165 from holding Mastercard or generate 8.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Microsoft vs. Mastercard
Performance |
| Timeline |
| Microsoft |
| Mastercard |
Microsoft and Mastercard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Mastercard
The main advantage of trading using opposite Microsoft and Mastercard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Mastercard 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 Mastercard will offset losses from the drop in Mastercard's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Mastercard vs. MEDICAL FACILITIES NEW | Mastercard vs. Sporttotal AG | Mastercard vs. MeVis Medical Solutions | Mastercard vs. Microbot Medical |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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