Correlation Between Synchrony Financial and Fortune Brands
Can any of the company-specific risk be diversified away by investing in both Synchrony Financial and Fortune Brands 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 Fortune Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Synchrony Financial and Fortune Brands Home, you can compare the effects of market volatilities on Synchrony Financial and Fortune Brands 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 Fortune Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Synchrony Financial and Fortune Brands.
Diversification Opportunities for Synchrony Financial and Fortune Brands
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Synchrony and Fortune is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and Fortune Brands Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Brands Home 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 Fortune Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortune Brands Home has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and Fortune Brands go up and down completely randomly.
Pair Corralation between Synchrony Financial and Fortune Brands
Assuming the 90 days trading horizon Synchrony Financial is expected to generate 2.13 times more return on investment than Fortune Brands. However, Synchrony Financial is 2.13 times more volatile than Fortune Brands Home. It trades about 0.21 of its potential returns per unit of risk. Fortune Brands Home is currently generating about -0.16 per unit of risk. If you would invest 5,555 in Synchrony Financial on August 30, 2024 and sell it today you would earn a total of 1,123 from holding Synchrony Financial or generate 20.22% 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. Fortune Brands Home
Performance |
| Timeline |
| Synchrony Financial |
| Fortune Brands Home |
Synchrony Financial and Fortune Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Synchrony Financial and Fortune Brands
The main advantage of trading using opposite Synchrony Financial and Fortune Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Synchrony Financial position performs unexpectedly, Fortune Brands 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 Fortune Brands will offset losses from the drop in Fortune Brands' long position.| Synchrony Financial vs. Tungsten West PLC | Synchrony Financial vs. Argo Group Limited | Synchrony Financial vs. Hardide PLC | Synchrony Financial vs. Versarien PLC |
| Fortune Brands vs. Tungsten West PLC | Fortune Brands vs. Argo Group Limited | Fortune Brands vs. Hardide PLC | Fortune Brands vs. Versarien PLC |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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