Correlation Between Mastercard and Synchrony Financial
Can any of the company-specific risk be diversified away by investing in both Mastercard and Synchrony 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 Synchrony Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mastercard and Synchrony Financial, you can compare the effects of market volatilities on Mastercard and Synchrony 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 Synchrony Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mastercard and Synchrony Financial.
Diversification Opportunities for Mastercard and Synchrony Financial
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Mastercard and Synchrony is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Synchrony Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synchrony 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 Synchrony Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synchrony Financial has no effect on the direction of Mastercard i.e., Mastercard and Synchrony Financial go up and down completely randomly.
Pair Corralation between Mastercard and Synchrony Financial
Allowing for the 90-day total investment horizon Mastercard is expected to generate 0.61 times more return on investment than Synchrony Financial. However, Mastercard is 1.65 times less risky than Synchrony Financial. It trades about 0.31 of its potential returns per unit of risk. Synchrony Financial is currently generating about -0.12 per unit of risk. If you would invest 52,470 in Mastercard on November 18, 2024 and sell it today you would earn a total of 4,006 from holding Mastercard or generate 7.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mastercard vs. Synchrony Financial
Performance |
| Timeline |
| Mastercard |
| Synchrony Financial |
Mastercard and Synchrony Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mastercard and Synchrony Financial
The main advantage of trading using opposite Mastercard and Synchrony Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mastercard position performs unexpectedly, Synchrony 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 Synchrony Financial will offset losses from the drop in Synchrony Financial's long position.| Mastercard vs. American Express | Mastercard vs. PayPal Holdings | Mastercard vs. Upstart Holdings | Mastercard vs. Capital One Financial |
| Synchrony Financial vs. Capital One Financial | Synchrony Financial vs. American Express | Synchrony Financial vs. Ally Financial | Synchrony Financial vs. Mastercard |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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