Correlation Between Bread Financial and Mastercard Incorporated

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

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

Diversification Opportunities for Bread Financial and Mastercard Incorporated

-0.23

Correlation Coefficient

Bread Financial  Mastercard Incorporated

Very good diversification

The 3 months correlation between Bread and Mastercard is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings and Mastercard Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard Incorporated and Bread Financial 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 Bread Financial Holdings are associated (or correlated) with Mastercard Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard Incorporated has no effect on the direction of Bread Financial i.e., Bread Financial and Mastercard Incorporated go up and down completely randomly.

Pair Corralation between Bread Financial and Mastercard Incorporated

Assuming the 90 days trading horizon Bread Financial Holdings is expected to generate 1.29 times more return on investment than Mastercard Incorporated. However, Bread Financial is 1.29 times more volatile than Mastercard Incorporated. It trades about 0.16 of its potential returns per unit of risk. Mastercard Incorporated is currently generating about 0.03 per unit of risk. If you would invest  6,900  in Bread Financial Holdings on April 23, 2025 and sell it today you would earn a total of  1,715  from holding Bread Financial Holdings or generate 24.86% return on investment over 90 days.

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

Bread Financial Holdings  vs.  Mastercard Incorporated

Bread Financial Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bread Financial Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Bread Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Mastercard Incorporated

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard Incorporated are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Mastercard Incorporated is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bread Financial and Mastercard Incorporated

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

The idea behind Bread Financial Holdings and Mastercard Incorporated 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.