Correlation Between Volkswagen and Mastercard
Can any of the company-specific risk be diversified away by investing in both Volkswagen 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 Volkswagen and Mastercard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG and Mastercard, you can compare the effects of market volatilities on Volkswagen 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 Volkswagen with a short position of Mastercard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Mastercard.
Diversification Opportunities for Volkswagen and Mastercard
-0.9 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Volkswagen and Mastercard is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Mastercard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard and Volkswagen 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 Volkswagen AG 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 Volkswagen i.e., Volkswagen and Mastercard go up and down completely randomly.
Pair Corralation between Volkswagen and Mastercard
Assuming the 90 days horizon Volkswagen AG is expected to under-perform the Mastercard. In addition to that, Volkswagen is 1.56 times more volatile than Mastercard. It trades about -0.2 of its total potential returns per unit of risk. Mastercard is currently generating about 0.3 per unit of volatility. 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 Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Volkswagen AG vs. Mastercard
Performance |
| Timeline |
| Volkswagen AG |
| Mastercard |
Volkswagen and Mastercard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Mastercard
The main advantage of trading using opposite Volkswagen and Mastercard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen 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.| Volkswagen vs. Norwegian Air Shuttle | Volkswagen vs. MYFAIR GOLD P | Volkswagen vs. NORWEGIAN AIR SHUT | Volkswagen vs. ALTAIR RES INC |
| 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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