Correlation Between Mastercard and Deutsche Small

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Can any of the company-specific risk be diversified away by investing in both Mastercard and Deutsche Small 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 Deutsche Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mastercard and Deutsche Small Cap, you can compare the effects of market volatilities on Mastercard and Deutsche Small 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 Deutsche Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mastercard and Deutsche Small.

Diversification Opportunities for Mastercard and Deutsche Small

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between Mastercard and Deutsche is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and DEUTSCHE SMALL CAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Small Cap 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 Deutsche Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Small Cap has no effect on the direction of Mastercard i.e., Mastercard and Deutsche Small go up and down completely randomly.

Pair Corralation between Mastercard and Deutsche Small

Allowing for the 90-day total investment horizon Mastercard is expected to generate 0.95 times more return on investment than Deutsche Small. However, Mastercard is 1.05 times less risky than Deutsche Small. It trades about 0.11 of its potential returns per unit of risk. Deutsche Small Cap is currently generating about 0.07 per unit of risk. If you would invest  36,426  in Mastercard on December 29, 2023 and sell it today you would earn a total of  11,369  from holding Mastercard or generate 31.21% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Mastercard  vs.  DEUTSCHE SMALL CAP

 Performance 
       Timeline  
Mastercard 

Risk-Adjusted Performance

15 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Mastercard may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Deutsche Small Cap 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Small Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly fragile forward indicators, Deutsche Small may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Mastercard and Deutsche Small Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mastercard and Deutsche Small

The main advantage of trading using opposite Mastercard and Deutsche Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mastercard position performs unexpectedly, Deutsche Small 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 Deutsche Small will offset losses from the drop in Deutsche Small's long position.
The idea behind Mastercard and Deutsche Small Cap pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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