Correlation Between Mastercard and Keyence

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

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

Diversification Opportunities for Mastercard and Keyence

-0.71

Correlation Coefficient

Mastercard  Keyence

Pay attention - limited upside

The 3 months correlation between Mastercard and Keyence is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Keyence in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keyence 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 Keyence. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keyence has no effect on the direction of Mastercard i.e., Mastercard and Keyence go up and down completely randomly.

Pair Corralation between Mastercard and Keyence

Assuming the 90 days horizon Mastercard is expected to generate 2.58 times less return on investment than Keyence. But when comparing it to its historical volatility, Mastercard is 4.96 times less risky than Keyence. It trades about 0.15 of its potential returns per unit of risk. Keyence is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  25,874  in Keyence on September 27, 2024 and sell it today you would earn a total of  13,726  from holding Keyence or generate 53.05% return on investment over 90 days.

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

Mastercard  vs.  Keyence

Mastercard

Risk-Adjusted Performance

15 of 100

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 nearly unsteady basic indicators, Mastercard reported solid returns over the last few months and may actually be approaching a breakup point.

Keyence

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Keyence has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Mastercard and Keyence

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

The idea behind Mastercard and Keyence 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.