Correlation Between Synchrony Financial and SM Energy
Can any of the company-specific risk be diversified away by investing in both Synchrony Financial and SM Energy 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 SM Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Synchrony Financial and SM Energy Co, you can compare the effects of market volatilities on Synchrony Financial and SM Energy 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 SM Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Synchrony Financial and SM Energy.
Diversification Opportunities for Synchrony Financial and SM Energy
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Synchrony and 0KZA is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and SM Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Energy 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 SM Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Energy has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and SM Energy go up and down completely randomly.
Pair Corralation between Synchrony Financial and SM Energy
Assuming the 90 days trading horizon Synchrony Financial is expected to generate 0.78 times more return on investment than SM Energy. However, Synchrony Financial is 1.28 times less risky than SM Energy. It trades about 0.01 of its potential returns per unit of risk. SM Energy Co is currently generating about -0.08 per unit of risk. If you would invest 6,732 in Synchrony Financial on November 6, 2024 and sell it today you would earn a total of 16.00 from holding Synchrony Financial or generate 0.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 93.55% |
| Values | Daily Returns |
Synchrony Financial vs. SM Energy Co
Performance |
| Timeline |
| Synchrony Financial |
| SM Energy |
Synchrony Financial and SM Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Synchrony Financial and SM Energy
The main advantage of trading using opposite Synchrony Financial and SM Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Synchrony Financial position performs unexpectedly, SM Energy 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 SM Energy will offset losses from the drop in SM Energy's long position.| Synchrony Financial vs. Sunny Optical Technology | Synchrony Financial vs. Monks Investment Trust | Synchrony Financial vs. Spotify Technology SA | Synchrony Financial vs. Take Two Interactive Software |
| SM Energy vs. TechnipFMC PLC | SM Energy vs. Auction Technology Group | SM Energy vs. Concurrent Technologies Plc | SM Energy vs. Made Tech Group |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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