Correlation Between Mastercard and LPL Financial
Can any of the company-specific risk be diversified away by investing in both Mastercard and LPL 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 LPL Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mastercard and LPL Financial Holdings, you can compare the effects of market volatilities on Mastercard and LPL 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 LPL Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mastercard and LPL Financial.
Diversification Opportunities for Mastercard and LPL Financial
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Mastercard and LPL is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and LPL Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPL Financial Holdings 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 LPL Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPL Financial Holdings has no effect on the direction of Mastercard i.e., Mastercard and LPL Financial go up and down completely randomly.
Pair Corralation between Mastercard and LPL Financial
Allowing for the 90-day total investment horizon Mastercard is expected to generate 1.41 times less return on investment than LPL Financial. But when comparing it to its historical volatility, Mastercard is 1.95 times less risky than LPL Financial. It trades about 0.11 of its potential returns per unit of risk. LPL Financial Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 19,920 in LPL Financial Holdings on August 31, 2024 and sell it today you would earn a total of 12,595 from holding LPL Financial Holdings or generate 63.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mastercard vs. LPL Financial Holdings
Performance |
| Timeline |
| Mastercard |
| LPL Financial Holdings |
Mastercard and LPL Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mastercard and LPL Financial
The main advantage of trading using opposite Mastercard and LPL Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mastercard position performs unexpectedly, LPL 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 LPL Financial will offset losses from the drop in LPL Financial's long position.| Mastercard vs. American Express | Mastercard vs. PayPal Holdings | Mastercard vs. Upstart Holdings | Mastercard vs. Capital One Financial |
| LPL Financial vs. Tradeweb Markets | LPL Financial vs. Raymond James Financial | LPL Financial vs. PJT Partners | LPL Financial vs. Moelis Co |
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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