Correlation Between Mastercard Incorporated and Credit Acceptance

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

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

Diversification Opportunities for Mastercard Incorporated and Credit Acceptance

-0.31

Correlation Coefficient

Mastercard Incorporated  Credit Acceptance

Very good diversification

The 3 months correlation between Mastercard and Credit is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard Incorporated and Credit Acceptance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit Acceptance and Mastercard Incorporated 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 Incorporated are associated (or correlated) with Credit Acceptance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Acceptance has no effect on the direction of Mastercard Incorporated i.e., Mastercard Incorporated and Credit Acceptance go up and down completely randomly.

Pair Corralation between Mastercard Incorporated and Credit Acceptance

Assuming the 90 days trading horizon Mastercard Incorporated is expected to generate 1.65 times more return on investment than Credit Acceptance. However, Mastercard Incorporated is 1.65 times more volatile than Credit Acceptance. It trades about 0.03 of its potential returns per unit of risk. Credit Acceptance is currently generating about 0.01 per unit of risk. If you would invest  9,700  in Mastercard Incorporated on April 23, 2025 and sell it today you would earn a total of  215.00  from holding Mastercard Incorporated or generate 2.22% return on investment over 90 days.

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

Mastercard Incorporated  vs.  Credit Acceptance

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.

Credit Acceptance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Credit Acceptance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Credit Acceptance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mastercard Incorporated and Credit Acceptance

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

The idea behind Mastercard Incorporated and Credit Acceptance 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.