Correlation Between Synchrony Financial and Fevertree Drinks
Can any of the company-specific risk be diversified away by investing in both Synchrony Financial and Fevertree Drinks 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 Fevertree Drinks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Synchrony Financial and Fevertree Drinks Plc, you can compare the effects of market volatilities on Synchrony Financial and Fevertree Drinks 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 Fevertree Drinks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Synchrony Financial and Fevertree Drinks.
Diversification Opportunities for Synchrony Financial and Fevertree Drinks
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Synchrony and Fevertree is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and Fevertree Drinks Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fevertree Drinks Plc 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 Fevertree Drinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fevertree Drinks Plc has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and Fevertree Drinks go up and down completely randomly.
Pair Corralation between Synchrony Financial and Fevertree Drinks
Assuming the 90 days trading horizon Synchrony Financial is expected to generate 2.58 times more return on investment than Fevertree Drinks. However, Synchrony Financial is 2.58 times more volatile than Fevertree Drinks Plc. It trades about 0.23 of its potential returns per unit of risk. Fevertree Drinks Plc is currently generating about -0.16 per unit of risk. If you would invest 5,528 in Synchrony Financial on September 1, 2024 and sell it today you would earn a total of 1,224 from holding Synchrony Financial or generate 22.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Synchrony Financial vs. Fevertree Drinks Plc
Performance |
| Timeline |
| Synchrony Financial |
| Fevertree Drinks Plc |
Synchrony Financial and Fevertree Drinks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Synchrony Financial and Fevertree Drinks
The main advantage of trading using opposite Synchrony Financial and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Synchrony Financial position performs unexpectedly, Fevertree Drinks 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 Fevertree Drinks will offset losses from the drop in Fevertree Drinks' long position.| Synchrony Financial vs. Uniper SE | Synchrony Financial vs. Mulberry Group PLC | Synchrony Financial vs. London Security Plc | Synchrony Financial vs. Triad Group PLC |
| Fevertree Drinks vs. SBM Offshore NV | Fevertree Drinks vs. Solstad Offshore ASA | Fevertree Drinks vs. Teradata Corp | Fevertree Drinks vs. Fidelity National Information |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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