Correlation Between Mastercard and Voya Financial

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

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

Diversification Opportunities for Mastercard and Voya Financial

-0.42

Correlation Coefficient

Mastercard  Voya Financial

Very good diversification

The 3 months correlation between Mastercard and Voya is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Voya Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voya 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 Voya Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voya Financial has no effect on the direction of Mastercard i.e., Mastercard and Voya Financial go up and down completely randomly.

Pair Corralation between Mastercard and Voya Financial

Allowing for the 90-day total investment horizon Mastercard is expected to generate 1.14 times more return on investment than Voya Financial. However, Mastercard is 1.14 times more volatile than Voya Financial. It trades about 0.1 of its potential returns per unit of risk. Voya Financial is currently generating about -0.12 per unit of risk. If you would invest  49,491  in Mastercard on October 2, 2024 and sell it today you would earn a total of  3,064  from holding Mastercard or generate 6.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Mastercard  vs.  Voya Financial

Mastercard

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Mastercard is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Voya Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Voya Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Preferred Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Mastercard and Voya Financial

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

The idea behind Mastercard and Voya 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .