Correlation Between Visa and Mastercard
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Mastercard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Mastercard, you can compare the effects of market volatilities on Visa 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 Visa with a short position of Mastercard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Mastercard.
Diversification Opportunities for Visa and Mastercard
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Visa and Mastercard is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Mastercard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard and Visa 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 Visa Class A 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 Visa i.e., Visa and Mastercard go up and down completely randomly.
Pair Corralation between Visa and Mastercard
Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.02 times more return on investment than Mastercard. However, Visa is 1.02 times more volatile than Mastercard. It trades about 0.28 of its potential returns per unit of risk. Mastercard is currently generating about 0.25 per unit of risk. If you would invest 27,633 in Visa Class A on September 3, 2024 and sell it today you would earn a total of 3,875 from holding Visa Class A or generate 14.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 97.67% |
| Values | Daily Returns |
Visa Class A vs. Mastercard
Performance |
| Timeline |
| Visa Class A |
| Mastercard |
Visa and Mastercard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Mastercard
The main advantage of trading using opposite Visa and Mastercard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart Holdings | Visa vs. Ally Financial |
| Mastercard vs. UNITED RENTALS | Mastercard vs. Automatic Data Processing | Mastercard vs. CarsalesCom | Mastercard vs. YATRA ONLINE DL 0001 |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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