Correlation Between Synchrony Financial and Mastercard Incorporated
Can any of the company-specific risk be diversified away by investing in both Synchrony 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 Synchrony 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 Synchrony Financial and Mastercard Incorporated, you can compare the effects of market volatilities on Synchrony 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 Synchrony Financial with a short position of Mastercard Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Synchrony Financial and Mastercard Incorporated.
Diversification Opportunities for Synchrony Financial and Mastercard Incorporated
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Synchrony and Mastercard is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and Mastercard Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard Incorporated and Synchrony 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 Synchrony Financial 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 Synchrony Financial i.e., Synchrony Financial and Mastercard Incorporated go up and down completely randomly.
Pair Corralation between Synchrony Financial and Mastercard Incorporated
Assuming the 90 days trading horizon Synchrony Financial is expected to generate 1.75 times more return on investment than Mastercard Incorporated. However, Synchrony Financial is 1.75 times more volatile than Mastercard Incorporated. It trades about 0.15 of its potential returns per unit of risk. Mastercard Incorporated is currently generating about 0.12 per unit of risk. If you would invest 21,147 in Synchrony Financial on October 12, 2024 and sell it today you would earn a total of 18,983 from holding Synchrony Financial or generate 89.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.47% |
| Values | Daily Returns |
Synchrony Financial vs. Mastercard Incorporated
Performance |
| Timeline |
| Synchrony Financial |
| Mastercard Incorporated |
Synchrony Financial and Mastercard Incorporated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Synchrony Financial and Mastercard Incorporated
The main advantage of trading using opposite Synchrony Financial and Mastercard Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Synchrony 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.| Synchrony Financial vs. Hormel Foods | Synchrony Financial vs. Clover Health Investments, | Synchrony Financial vs. Unifique Telecomunicaes SA | Synchrony Financial vs. Ares Management |
| Mastercard Incorporated vs. Autohome | Mastercard Incorporated vs. Microchip Technology Incorporated | Mastercard Incorporated vs. Vulcan Materials | Mastercard Incorporated vs. ON Semiconductor |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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