Correlation Between Mastercard and Qudian

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

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

Diversification Opportunities for Mastercard and Qudian

0.83

Correlation Coefficient

Mastercard  Qudian

Very poor diversification

The 3 months correlation between Mastercard and Qudian is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Qudian Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qudian Inc 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 Qudian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qudian Inc has no effect on the direction of Mastercard i.e., Mastercard and Qudian go up and down completely randomly.

Pair Corralation between Mastercard and Qudian

Allowing for the 90-day total investment horizon Mastercard is expected to generate 6.25 times less return on investment than Qudian. But when comparing it to its historical volatility, Mastercard is 5.55 times less risky than Qudian. It trades about 0.17 of its potential returns per unit of risk. Qudian Inc is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  177.00  in Qudian Inc on September 1, 2024 and sell it today you would earn a total of  137.00  from holding Qudian Inc or generate 77.4% return on investment over 90 days.

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

Mastercard  vs.  Qudian Inc

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.

Qudian Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Qudian Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Qudian exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mastercard and Qudian

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

The idea behind Mastercard and Qudian Inc 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.