Correlation Between LendingClub Corp and Mastercard

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

By analyzing existing cross correlation between LendingClub Corp and Mastercard, you can compare the effects of market volatilities on LendingClub Corp and Mastercard 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 LendingClub Corp with a short position of Mastercard. Check out your portfolio center. Please also check ongoing floating volatility patterns of LendingClub Corp and Mastercard.

Diversification Opportunities for LendingClub Corp and Mastercard

-0.09

Correlation Coefficient

LendingClub Corp  Mastercard

Good diversification

The 3 months correlation between LendingClub and Mastercard is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding LendingClub Corp and Mastercard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard and LendingClub Corp 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 LendingClub Corp are associated (or correlated) with Mastercard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard has no effect on the direction of LendingClub Corp i.e., LendingClub Corp and Mastercard go up and down completely randomly.

Pair Corralation between LendingClub Corp and Mastercard

Allowing for the 90-day total investment horizon LendingClub Corp is expected to under-perform the Mastercard. In addition to that, LendingClub Corp is 2.47 times more volatile than Mastercard. It trades about -0.02 of its total potential returns per unit of risk. Mastercard is currently generating about 0.04 per unit of volatility. If you would invest  35,469  in Mastercard on January 20, 2024 and sell it today you would earn a total of  10,070  from holding Mastercard or generate 28.39% return on investment over 90 days.

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

LendingClub Corp  vs.  Mastercard

LendingClub Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LendingClub Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Mastercard

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 4 (%) 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with LendingClub Corp and Mastercard

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

The idea behind LendingClub Corp and Mastercard 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.