Correlation Between Mastercard and Lufax Holding

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

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

Diversification Opportunities for Mastercard and Lufax Holding

-0.37

Correlation Coefficient

Mastercard  Lufax Holding

Very good diversification

The 3 months correlation between Mastercard and Lufax is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Lufax Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lufax Holding 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 Lufax Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lufax Holding has no effect on the direction of Mastercard i.e., Mastercard and Lufax Holding go up and down completely randomly.

Pair Corralation between Mastercard and Lufax Holding

Allowing for the 90-day total investment horizon Mastercard is expected to generate 2.45 times less return on investment than Lufax Holding. But when comparing it to its historical volatility, Mastercard is 5.5 times less risky than Lufax Holding. It trades about 0.11 of its potential returns per unit of risk. Lufax Holding is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  172.00  in Lufax Holding on September 19, 2024 and sell it today you would earn a total of  70.00  from holding Lufax Holding or generate 40.7% return on investment over 90 days.

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

Mastercard  vs.  Lufax Holding

Mastercard

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Mastercard is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Lufax Holding

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lufax Holding are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Lufax Holding unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mastercard and Lufax Holding

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

The idea behind Mastercard and Lufax Holding 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.