Correlation Between Synchrony Financial and Johnson Matthey
Can any of the company-specific risk be diversified away by investing in both Synchrony Financial and Johnson Matthey 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 Johnson Matthey into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Synchrony Financial and Johnson Matthey PLC, you can compare the effects of market volatilities on Synchrony Financial and Johnson Matthey 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 Johnson Matthey. Check out your portfolio center. Please also check ongoing floating volatility patterns of Synchrony Financial and Johnson Matthey.
Diversification Opportunities for Synchrony Financial and Johnson Matthey
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Synchrony and Johnson is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and Johnson Matthey PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Matthey 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 Johnson Matthey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Matthey PLC has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and Johnson Matthey go up and down completely randomly.
Pair Corralation between Synchrony Financial and Johnson Matthey
Assuming the 90 days trading horizon Synchrony Financial is expected to generate 1.34 times more return on investment than Johnson Matthey. However, Synchrony Financial is 1.34 times more volatile than Johnson Matthey PLC. It trades about 0.12 of its potential returns per unit of risk. Johnson Matthey PLC is currently generating about -0.01 per unit of risk. If you would invest 3,907 in Synchrony Financial on November 7, 2024 and sell it today you would earn a total of 3,012 from holding Synchrony Financial or generate 77.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.79% |
| Values | Daily Returns |
Synchrony Financial vs. Johnson Matthey PLC
Performance |
| Timeline |
| Synchrony Financial |
| Johnson Matthey PLC |
Synchrony Financial and Johnson Matthey Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Synchrony Financial and Johnson Matthey
The main advantage of trading using opposite Synchrony Financial and Johnson Matthey positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Synchrony Financial position performs unexpectedly, Johnson Matthey 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 Johnson Matthey will offset losses from the drop in Johnson Matthey's long position.| Synchrony Financial vs. Gamma Communications PLC | Synchrony Financial vs. Spirent Communications plc | Synchrony Financial vs. Chrysalis Investments | Synchrony Financial vs. Canadian General Investments |
| Johnson Matthey vs. Givaudan SA | Johnson Matthey vs. Antofagasta PLC | Johnson Matthey vs. Ferrexpo PLC | Johnson Matthey vs. Atalaya Mining |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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