Correlation Between Mastercard and Gladstone Investment

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

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

Diversification Opportunities for Mastercard and Gladstone Investment

0.7

Correlation Coefficient

Mastercard  Gladstone Investment

Poor diversification

The 3 months correlation between Mastercard and Gladstone is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Gladstone Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Investment 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 Gladstone Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gladstone Investment has no effect on the direction of Mastercard i.e., Mastercard and Gladstone Investment go up and down completely randomly.

Pair Corralation between Mastercard and Gladstone Investment

Allowing for the 90-day total investment horizon Mastercard is expected to generate 1.13 times less return on investment than Gladstone Investment. But when comparing it to its historical volatility, Mastercard is 1.34 times less risky than Gladstone Investment. It trades about 0.17 of its potential returns per unit of risk. Gladstone Investment is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,209  in Gladstone Investment on August 31, 2024 and sell it today you would earn a total of  143.00  from holding Gladstone Investment or generate 11.83% return on investment over 90 days.

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

Mastercard  vs.  Gladstone Investment

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.

Gladstone Investment

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Investment are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Gladstone Investment may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Mastercard and Gladstone Investment

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

The idea behind Mastercard and Gladstone Investment 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.