Correlation Between Mastercard and Horizon Space

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

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

Diversification Opportunities for Mastercard and Horizon Space

0.85

Correlation Coefficient

Mastercard  Horizon Space

Very poor diversification

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

Pair Corralation between Mastercard and Horizon Space

Allowing for the 90-day total investment horizon Mastercard is expected to generate 5.32 times more return on investment than Horizon Space. However, Mastercard is 5.32 times more volatile than Horizon Space Acquisition. It trades about 0.13 of its potential returns per unit of risk. Horizon Space Acquisition is currently generating about 0.15 per unit of risk. If you would invest  49,209  in Mastercard on September 20, 2024 and sell it today you would earn a total of  3,892  from holding Mastercard or generate 7.91% return on investment over 90 days.

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

Mastercard  vs.  Horizon Space Acquisition

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 inconsistent basic indicators, Mastercard may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Horizon Space Acquisition

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Horizon Space Acquisition are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Horizon Space is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Mastercard and Horizon Space

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

The idea behind Mastercard and Horizon Space Acquisition 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.