Correlation Between Synchrony Financial and Medallion Financial

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

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

Diversification Opportunities for Synchrony Financial and Medallion Financial

-0.18

Correlation Coefficient

Synchrony Financial  Medallion Financial

Good diversification

The 3 months correlation between Synchrony and Medallion is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and Medallion Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medallion Financial Corp 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 Medallion Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medallion Financial Corp has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and Medallion Financial go up and down completely randomly.

Pair Corralation between Synchrony Financial and Medallion Financial

Assuming the 90 days trading horizon Synchrony Financial is expected to generate 0.24 times more return on investment than Medallion Financial. However, Synchrony Financial is 4.1 times less risky than Medallion Financial. It trades about 0.01 of its potential returns per unit of risk. Medallion Financial Corp is currently generating about -0.1 per unit of risk. If you would invest  2,558  in Synchrony Financial on December 1, 2024 and sell it today you would earn a total of  2.00  from holding Synchrony Financial or generate 0.08% return on investment over 90 days.

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

Synchrony Financial  vs.  Medallion Financial Corp

Synchrony Financial

Risk-Adjusted Performance

Very Weak

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

Medallion Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Medallion Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Synchrony Financial and Medallion Financial

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

The idea behind Synchrony Financial and Medallion Financial Corp 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.