Correlation Between Mastercard and Bancroft Fund

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

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

Diversification Opportunities for Mastercard and Bancroft Fund

0.9

Correlation Coefficient

Mastercard  Bancroft Fund

Almost no diversification

The 3 months correlation between Mastercard and Bancroft is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Bancroft Fund Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bancroft Fund Limited 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 Bancroft Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bancroft Fund Limited has no effect on the direction of Mastercard i.e., Mastercard and Bancroft Fund go up and down completely randomly.

Pair Corralation between Mastercard and Bancroft Fund

Allowing for the 90-day total investment horizon Mastercard is expected to generate 1.57 times less return on investment than Bancroft Fund. In addition to that, Mastercard is 1.35 times more volatile than Bancroft Fund Limited. It trades about 0.17 of its total potential returns per unit of risk. Bancroft Fund Limited is currently generating about 0.37 per unit of volatility. If you would invest  1,564  in Bancroft Fund Limited on September 1, 2024 and sell it today you would earn a total of  275.00  from holding Bancroft Fund Limited or generate 17.58% return on investment over 90 days.

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

Mastercard  vs.  Bancroft Fund Limited

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 December 2024.

Bancroft Fund Limited

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Bancroft Fund Limited are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, Bancroft Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mastercard and Bancroft Fund

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

The idea behind Mastercard and Bancroft Fund Limited 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.