Correlation Between Synchrony Financial and Prudential Financial
Can any of the company-specific risk be diversified away by investing in both Synchrony Financial and Prudential 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 Prudential 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 Prudential Financial, you can compare the effects of market volatilities on Synchrony Financial and Prudential 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 Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Synchrony Financial and Prudential Financial.
Diversification Opportunities for Synchrony Financial and Prudential Financial
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Synchrony and Prudential is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial 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 Prudential Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Financial has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and Prudential Financial go up and down completely randomly.
Pair Corralation between Synchrony Financial and Prudential Financial
Assuming the 90 days trading horizon Synchrony Financial is expected to generate 1.87 times more return on investment than Prudential Financial. However, Synchrony Financial is 1.87 times more volatile than Prudential Financial. It trades about 0.18 of its potential returns per unit of risk. Prudential Financial is currently generating about 0.1 per unit of risk. If you would invest 4,921 in Synchrony Financial on August 28, 2024 and sell it today you would earn a total of 1,838 from holding Synchrony Financial or generate 37.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.44% |
| Values | Daily Returns |
Synchrony Financial vs. Prudential Financial
Performance |
| Timeline |
| Synchrony Financial |
| Prudential Financial |
Synchrony Financial and Prudential Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Synchrony Financial and Prudential Financial
The main advantage of trading using opposite Synchrony Financial and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Synchrony Financial position performs unexpectedly, Prudential 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 Prudential Financial will offset losses from the drop in Prudential Financial's long position.| Synchrony Financial vs. Samsung Electronics Co | Synchrony Financial vs. Samsung Electronics Co | Synchrony Financial vs. Hyundai Motor | Synchrony Financial vs. Toyota Motor Corp |
| Prudential Financial vs. FC Investment Trust | Prudential Financial vs. Tatton Asset Management | Prudential Financial vs. Lowland Investment Co | Prudential Financial vs. Federal Realty Investment |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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