Correlation Between Mastercard and OneMain Holdings

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

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

Diversification Opportunities for Mastercard and OneMain Holdings

0.82

Correlation Coefficient

Mastercard  OneMain Holdings

Very poor diversification

The 3 months correlation between Mastercard and OneMain is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and OneMain Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OneMain 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 OneMain Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OneMain Holdings has no effect on the direction of Mastercard i.e., Mastercard and OneMain Holdings go up and down completely randomly.

Pair Corralation between Mastercard and OneMain Holdings

Allowing for the 90-day total investment horizon Mastercard is expected to generate 0.49 times more return on investment than OneMain Holdings. However, Mastercard is 2.03 times less risky than OneMain Holdings. It trades about 0.1 of its potential returns per unit of risk. OneMain Holdings is currently generating about 0.03 per unit of risk. If you would invest  42,123  in Mastercard on September 20, 2024 and sell it today you would earn a total of  10,978  from holding Mastercard or generate 26.06% return on investment over 90 days.

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

Mastercard  vs.  OneMain Holdings

Mastercard

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Mastercard may actually be approaching a critical reversion point that can send shares even higher in January 2025.

OneMain Holdings

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in OneMain Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting primary indicators, OneMain Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Mastercard and OneMain Holdings

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

The idea behind Mastercard and OneMain Holdings 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.