Correlation Between Mastercard and Green Dot

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

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

Diversification Opportunities for Mastercard and Green Dot

-0.38

Correlation Coefficient

Mastercard  Green Dot

Very good diversification

The 3 months correlation between Mastercard and Green is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Green Dot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Dot 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 Green Dot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Dot has no effect on the direction of Mastercard i.e., Mastercard and Green Dot go up and down completely randomly.

Pair Corralation between Mastercard and Green Dot

Allowing for the 90-day total investment horizon Mastercard is expected to generate 0.31 times more return on investment than Green Dot. However, Mastercard is 3.21 times less risky than Green Dot. It trades about 0.14 of its potential returns per unit of risk. Green Dot is currently generating about 0.04 per unit of risk. If you would invest  44,340  in Mastercard on September 30, 2024 and sell it today you would earn a total of  8,880  from holding Mastercard or generate 20.03% return on investment over 90 days.

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

Mastercard  vs.  Green Dot

Mastercard

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 10 (%) 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.

Green Dot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Green Dot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Green Dot is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Mastercard and Green Dot

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

The idea behind Mastercard and Green Dot 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.