Correlation Between Mastercard and Ally Financial

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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

  Correlation Coefficient

Poor diversification

The 3 months correlation between Mastercard and Ally Financial is 0.74. 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 0.55 times more return on investment than Ally Financial. However, Mastercard is 1.83 times less risky than Ally Financial. It trades about -0.42 of its potential returns per unit of risk. Ally Financial is currently generating about -0.27 per unit of risk. If you would invest  32,525  in Mastercard on July 3, 2022 and sell it today you would lose (4,091)  from holding Mastercard or give up 12.58% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

Mastercard  vs.  Ally Financial

 Performance (%) 
Mastercard Performance
0 of 100
Over the last 90 days Mastercard has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest sluggish performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Mastercard Price Channel

Ally Financial 
Ally Financial Performance
0 of 100
Over the last 90 days Ally Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of sluggish performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in November 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Ally Financial Price Channel

Mastercard and Ally Financial Volatility Contrast

   Predicted Return Density   

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. Paypal Holdings
The idea behind Mastercard and Ally Financial 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.
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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