Correlation Between STMicroelectronics and Synchrony Financial
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics 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 STMicroelectronics and Synchrony Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Synchrony Financial, you can compare the effects of market volatilities on STMicroelectronics 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 STMicroelectronics with a short position of Synchrony Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Synchrony Financial.
Diversification Opportunities for STMicroelectronics and Synchrony Financial
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between STMicroelectronics and Synchrony is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Synchrony Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synchrony Financial and STMicroelectronics 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 STMicroelectronics NV 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 STMicroelectronics i.e., STMicroelectronics and Synchrony Financial go up and down completely randomly.
Pair Corralation between STMicroelectronics and Synchrony Financial
Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the Synchrony Financial. In addition to that, STMicroelectronics is 1.17 times more volatile than Synchrony Financial. It trades about -0.11 of its total potential returns per unit of risk. Synchrony Financial is currently generating about -0.09 per unit of volatility. If you would invest 6,759 in Synchrony Financial on September 24, 2024 and sell it today you would lose (174.00) from holding Synchrony Financial or give up 2.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
STMicroelectronics NV vs. Synchrony Financial
Performance |
| Timeline |
| STMicroelectronics |
| Synchrony Financial |
STMicroelectronics and Synchrony Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Synchrony Financial
The main advantage of trading using opposite STMicroelectronics and Synchrony Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics 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.| STMicroelectronics vs. Marks and Spencer | STMicroelectronics vs. Boston Scientific Corp | STMicroelectronics vs. OTP Bank Nyrt | STMicroelectronics vs. Rio Tinto PLC |
| Synchrony Financial vs. Zegona Communications Plc | Synchrony Financial vs. United Airlines Holdings | Synchrony Financial vs. mobilezone holding AG | Synchrony Financial vs. STMicroelectronics NV |
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 Stocks Directory module to find actively traded stocks across global markets.
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