Correlation Between Mastercard and Veeva Systems

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

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

Diversification Opportunities for Mastercard and Veeva Systems

0.85

Correlation Coefficient

Mastercard  Veeva Systems

Very poor diversification

The 3 months correlation between Mastercard and Veeva is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Veeva Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veeva Systems 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 Veeva Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veeva Systems has no effect on the direction of Mastercard i.e., Mastercard and Veeva Systems go up and down completely randomly.

Pair Corralation between Mastercard and Veeva Systems

Assuming the 90 days horizon Mastercard is expected to generate 1.24 times less return on investment than Veeva Systems. But when comparing it to its historical volatility, Mastercard is 1.88 times less risky than Veeva Systems. It trades about 0.12 of its potential returns per unit of risk. Veeva Systems is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  17,340  in Veeva Systems on September 23, 2024 and sell it today you would earn a total of  3,910  from holding Veeva Systems or generate 22.55% return on investment over 90 days.

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

Mastercard  vs.  Veeva Systems

Mastercard

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 14 (%) 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.

Veeva Systems

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Veeva Systems are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Veeva Systems may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Mastercard and Veeva Systems

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

The idea behind Mastercard and Veeva Systems 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.