Correlation Between Mastercard and PIMCO RAFI

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Can any of the company-specific risk be diversified away by investing in both Mastercard and PIMCO RAFI 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 PIMCO RAFI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mastercard and PIMCO RAFI Dynamic, you can compare the effects of market volatilities on Mastercard and PIMCO RAFI 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 PIMCO RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mastercard and PIMCO RAFI.

Diversification Opportunities for Mastercard and PIMCO RAFI

0.76
  Correlation Coefficient

Poor diversification

The 3 months correlation between Mastercard and PIMCO is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and PIMCO RAFI Dynamic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO RAFI Dynamic 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 PIMCO RAFI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO RAFI Dynamic has no effect on the direction of Mastercard i.e., Mastercard and PIMCO RAFI go up and down completely randomly.

Pair Corralation between Mastercard and PIMCO RAFI

Allowing for the 90-day total investment horizon Mastercard is expected to generate 1.39 times more return on investment than PIMCO RAFI. However, Mastercard is 1.39 times more volatile than PIMCO RAFI Dynamic. It trades about 0.04 of its potential returns per unit of risk. PIMCO RAFI Dynamic is currently generating about 0.05 per unit of risk. If you would invest  47,475  in Mastercard on December 29, 2023 and sell it today you would earn a total of  320.00  from holding Mastercard or generate 0.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Mastercard  vs.  PIMCO RAFI Dynamic

 Performance 
       Timeline  
Mastercard 

Risk-Adjusted Performance

15 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Mastercard may actually be approaching a critical reversion point that can send shares even higher in April 2024.
PIMCO RAFI Dynamic 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO RAFI Dynamic are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, PIMCO RAFI is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Mastercard and PIMCO RAFI Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mastercard and PIMCO RAFI

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

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