Correlation Between Mastercard and SohuCom

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

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

Diversification Opportunities for Mastercard and SohuCom

0.15

Correlation Coefficient

Mastercard  SohuCom

Average diversification

The 3 months correlation between Mastercard and SohuCom is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and SohuCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SohuCom 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 SohuCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SohuCom has no effect on the direction of Mastercard i.e., Mastercard and SohuCom go up and down completely randomly.

Pair Corralation between Mastercard and SohuCom

Allowing for the 90-day total investment horizon Mastercard is expected to generate 0.55 times more return on investment than SohuCom. However, Mastercard is 1.83 times less risky than SohuCom. It trades about 0.05 of its potential returns per unit of risk. SohuCom is currently generating about -0.01 per unit of risk. If you would invest  34,909  in Mastercard on January 25, 2024 and sell it today you would earn a total of  11,373  from holding Mastercard or generate 32.58% return on investment over 90 days.

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

Mastercard  vs.  SohuCom

Mastercard

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 7 (%) 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 newest stock price disturbance, may contribute to short-term losses for the investors.

SohuCom

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SohuCom are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, SohuCom unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mastercard and SohuCom

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

The idea behind Mastercard and SohuCom 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.