Correlation Between Mastercard and Carlyle
Can any of the company-specific risk be diversified away by investing in both Mastercard and Carlyle 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 and Carlyle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mastercard and Carlyle Group, you can compare the effects of market volatilities on Mastercard and Carlyle 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 with a short position of Carlyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mastercard and Carlyle.
Diversification Opportunities for Mastercard and Carlyle
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Mastercard and Carlyle is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Carlyle Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlyle Group and Mastercard 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 are associated (or correlated) with Carlyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlyle Group has no effect on the direction of Mastercard i.e., Mastercard and Carlyle go up and down completely randomly.
Pair Corralation between Mastercard and Carlyle
Allowing for the 90-day total investment horizon Mastercard is expected to generate 2.8 times less return on investment than Carlyle. But when comparing it to its historical volatility, Mastercard is 1.87 times less risky than Carlyle. It trades about 0.15 of its potential returns per unit of risk. Carlyle Group is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 2,721 in Carlyle Group on January 18, 2024 and sell it today you would earn a total of 1,785 from holding Carlyle Group or generate 65.6% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Mastercard vs. Carlyle Group
Performance |
Timeline |
Mastercard |
Carlyle Group |
Mastercard and Carlyle Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Mastercard and Carlyle
The main advantage of trading using opposite Mastercard and Carlyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mastercard position performs unexpectedly, Carlyle 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 Carlyle will offset losses from the drop in Carlyle's long position.Mastercard vs. Diamond Hill Investment | Mastercard vs. Distoken Acquisition | Mastercard vs. AllianceBernstein Holding LP | Mastercard vs. Associated Capital Group |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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