Correlation Between Mastercard and Brookfield Asset

Can any of the company-specific risk be diversified away by investing in both Mastercard and Brookfield Asset 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 Brookfield Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mastercard and Brookfield Asset Management, you can compare the effects of market volatilities on Mastercard and Brookfield Asset 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 Brookfield Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mastercard and Brookfield Asset.

Diversification Opportunities for Mastercard and Brookfield Asset

0.62

Correlation Coefficient

Mastercard  Brookfield Asset

Poor diversification

The 3 months correlation between Mastercard and Brookfield is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Brookfield Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Asset Man 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 Brookfield Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Asset Man has no effect on the direction of Mastercard i.e., Mastercard and Brookfield Asset go up and down completely randomly.

Pair Corralation between Mastercard and Brookfield Asset

Allowing for the 90-day total investment horizon Mastercard is expected to generate 0.51 times more return on investment than Brookfield Asset. However, Mastercard is 1.95 times less risky than Brookfield Asset. It trades about -0.22 of its potential returns per unit of risk. Brookfield Asset Management is currently generating about -0.16 per unit of risk. If you would invest  48,090  in Mastercard on January 28, 2024 and sell it today you would lose (1,848) from holding Mastercard or give up 3.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Mastercard  vs.  Brookfield Asset Management

Mastercard

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Mastercard is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Brookfield Asset Man

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brookfield Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Brookfield Asset is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Mastercard and Brookfield Asset

The main advantage of trading using opposite Mastercard and Brookfield Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mastercard position performs unexpectedly, Brookfield Asset 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 Brookfield Asset will offset losses from the drop in Brookfield Asset's long position.

The idea behind Mastercard and Brookfield Asset Management 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.

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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.