Correlation Between Mastercard and Ally Financial
Can any of the company-specific risk be diversified away by investing in both Mastercard and Ally Financial 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 Ally Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mastercard and Ally Financial, you can compare the effects of market volatilities on Mastercard and Ally Financial 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 Ally Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mastercard and Ally Financial.
Diversification Opportunities for Mastercard and Ally Financial
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mastercard and Ally is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Ally Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ally Financial 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 Ally Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ally Financial has no effect on the direction of Mastercard i.e., Mastercard and Ally Financial go up and down completely randomly.
Pair Corralation between Mastercard and Ally Financial
Allowing for the 90-day total investment horizon Mastercard is expected to generate 1.35 times less return on investment than Ally Financial. But when comparing it to its historical volatility, Mastercard is 1.65 times less risky than Ally Financial. It trades about 0.33 of its potential returns per unit of risk. Ally Financial is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 3,576 in Ally Financial on November 2, 2024 and sell it today you would earn a total of 408.00 from holding Ally Financial or generate 11.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mastercard vs. Ally Financial
Performance |
| Timeline |
| Mastercard |
| Ally Financial |
Mastercard and Ally Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mastercard and Ally Financial
The main advantage of trading using opposite Mastercard and Ally Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mastercard position performs unexpectedly, Ally Financial 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 Ally Financial will offset losses from the drop in Ally Financial's long position.| Mastercard vs. American Express | Mastercard vs. Upstart Holdings | Mastercard vs. Capital One Financial | Mastercard vs. Visa Class A |
| Ally Financial vs. American Express | Ally Financial vs. Mastercard | Ally Financial vs. Visa Class A | Ally Financial vs. PayPal Holdings |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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