Correlation Between Synchrony Financial and Merchants Bancorp
Can any of the company-specific risk be diversified away by investing in both Synchrony Financial and Merchants Bancorp 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 Merchants Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Synchrony Financial and Merchants Bancorp, you can compare the effects of market volatilities on Synchrony Financial and Merchants Bancorp 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 Merchants Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Synchrony Financial and Merchants Bancorp.
Diversification Opportunities for Synchrony Financial and Merchants Bancorp
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Synchrony and Merchants is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Bancorp 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 Merchants Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants Bancorp has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and Merchants Bancorp go up and down completely randomly.
Pair Corralation between Synchrony Financial and Merchants Bancorp
Considering the 90-day investment horizon Synchrony Financial is expected to generate 0.84 times more return on investment than Merchants Bancorp. However, Synchrony Financial is 1.19 times less risky than Merchants Bancorp. It trades about 0.07 of its potential returns per unit of risk. Merchants Bancorp is currently generating about 0.04 per unit of risk. If you would invest 2,810 in Synchrony Financial on January 1, 2025 and sell it today you would earn a total of 2,433 from holding Synchrony Financial or generate 86.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Synchrony Financial vs. Merchants Bancorp
Performance |
| Timeline |
| Synchrony Financial |
| Merchants Bancorp |
Synchrony Financial and Merchants Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Synchrony Financial and Merchants Bancorp
The main advantage of trading using opposite Synchrony Financial and Merchants Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Synchrony Financial position performs unexpectedly, Merchants Bancorp 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 Merchants Bancorp will offset losses from the drop in Merchants Bancorp's long position.| Synchrony Financial vs. Capital One Financial | Synchrony Financial vs. American Express | Synchrony Financial vs. Ally Financial | Synchrony Financial vs. Mastercard |
| Merchants Bancorp vs. RBB Bancorp | Merchants Bancorp vs. Midland States Bancorp | Merchants Bancorp vs. SmartFinancial, | Merchants Bancorp vs. Business First Bancshares |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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