Correlation Between Mastercard and Sally Beauty
Can any of the company-specific risk be diversified away by investing in both Mastercard and Sally Beauty 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 Sally Beauty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mastercard and Sally Beauty Holdings, you can compare the effects of market volatilities on Mastercard and Sally Beauty 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 Sally Beauty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mastercard and Sally Beauty.
Diversification Opportunities for Mastercard and Sally Beauty
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Mastercard and Sally is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Sally Beauty Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sally Beauty 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 Sally Beauty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sally Beauty Holdings has no effect on the direction of Mastercard i.e., Mastercard and Sally Beauty go up and down completely randomly.
Pair Corralation between Mastercard and Sally Beauty
Allowing for the 90-day total investment horizon Mastercard is expected to generate 0.27 times more return on investment than Sally Beauty. However, Mastercard is 3.71 times less risky than Sally Beauty. It trades about -0.4 of its potential returns per unit of risk. Sally Beauty Holdings is currently generating about -0.22 per unit of risk. If you would invest 48,736 in Mastercard on January 20, 2024 and sell it today you would lose (3,266) from holding Mastercard or give up 6.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Mastercard vs. Sally Beauty Holdings
Performance |
| Timeline |
| Mastercard |
| Sally Beauty Holdings |
Mastercard and Sally Beauty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mastercard and Sally Beauty
The main advantage of trading using opposite Mastercard and Sally Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mastercard position performs unexpectedly, Sally Beauty 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 Sally Beauty will offset losses from the drop in Sally Beauty's long position.| Mastercard vs. American Express | Mastercard vs. Capital One Financial | Mastercard vs. Upstart HoldingsInc | Mastercard vs. Ally Financial |
| Sally Beauty vs. OReilly Automotive | Sally Beauty vs. AutoZone | Sally Beauty vs. Genuine Parts Co | Sally Beauty vs. Williams Sonoma |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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