Correlation Between Embrace Change and Mastercard

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

By analyzing existing cross correlation between Embrace Change Acquisition and Mastercard, you can compare the effects of market volatilities on Embrace Change and Mastercard 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 Embrace Change with a short position of Mastercard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embrace Change and Mastercard.

Diversification Opportunities for Embrace Change and Mastercard

-0.37

Correlation Coefficient

Embrace Change  Mastercard

Very good diversification

The 3 months correlation between Embrace and Mastercard is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Embrace Change Acquisition and Mastercard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard and Embrace Change 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 Embrace Change Acquisition are associated (or correlated) with Mastercard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard has no effect on the direction of Embrace Change i.e., Embrace Change and Mastercard go up and down completely randomly.

Pair Corralation between Embrace Change and Mastercard

Assuming the 90 days horizon Embrace Change Acquisition is expected to generate 277.74 times more return on investment than Mastercard. However, Embrace Change is 277.74 times more volatile than Mastercard. It trades about 0.23 of its potential returns per unit of risk. Mastercard is currently generating about 0.17 per unit of risk. If you would invest  14.00  in Embrace Change Acquisition on September 2, 2024 and sell it today you would lose (2.00) from holding Embrace Change Acquisition or give up 14.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	23.44%
Values	Daily Returns

Embrace Change Acquisition  vs.  Mastercard

Embrace Change Acqui

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Embrace Change Acquisition are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal technical and fundamental indicators, Embrace Change reported solid returns over the last few months and may actually be approaching a breakup point.

Mastercard

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mastercard may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Embrace Change and Mastercard

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

The idea behind Embrace Change Acquisition and Mastercard 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.