Correlation Between Select Sector and Mastercard Incorporated
Can any of the company-specific risk be diversified away by investing in both Select Sector and Mastercard Incorporated 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 Select Sector and Mastercard Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Select Sector and Mastercard Incorporated, you can compare the effects of market volatilities on Select Sector and Mastercard Incorporated 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 Select Sector with a short position of Mastercard Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Sector and Mastercard Incorporated.
Diversification Opportunities for Select Sector and Mastercard Incorporated
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Select and Mastercard is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding The Select Sector and Mastercard Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard Incorporated and Select Sector 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 The Select Sector are associated (or correlated) with Mastercard Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard Incorporated has no effect on the direction of Select Sector i.e., Select Sector and Mastercard Incorporated go up and down completely randomly.
Pair Corralation between Select Sector and Mastercard Incorporated
Assuming the 90 days trading horizon The Select Sector is expected to under-perform the Mastercard Incorporated. In addition to that, Select Sector is 1.33 times more volatile than Mastercard Incorporated. It trades about -0.08 of its total potential returns per unit of risk. Mastercard Incorporated is currently generating about -0.05 per unit of volatility. If you would invest 1,095,500 in Mastercard Incorporated on September 13, 2024 and sell it today you would lose (19,000) from holding Mastercard Incorporated or give up 1.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Select Sector vs. Mastercard Incorporated
Performance |
| Timeline |
| Select Sector |
| Mastercard Incorporated |
Select Sector and Mastercard Incorporated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Select Sector and Mastercard Incorporated
The main advantage of trading using opposite Select Sector and Mastercard Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select Sector position performs unexpectedly, Mastercard Incorporated 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 Incorporated will offset losses from the drop in Mastercard Incorporated's long position.| Select Sector vs. The Select Sector | Select Sector vs. The Select Sector | Select Sector vs. The Select Sector | Select Sector vs. The Select Sector |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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