Correlation Between Sumitomo Mitsui and Synchrony Financial
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and Synchrony 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 Sumitomo Mitsui and Synchrony Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Mitsui Construction and Synchrony Financial, you can compare the effects of market volatilities on Sumitomo Mitsui and Synchrony 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 Sumitomo Mitsui with a short position of Synchrony Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Synchrony Financial.
Diversification Opportunities for Sumitomo Mitsui and Synchrony Financial
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sumitomo and Synchrony is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Construction and Synchrony Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synchrony Financial and Sumitomo Mitsui 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 Sumitomo Mitsui Construction are associated (or correlated) with Synchrony Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synchrony Financial has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Synchrony Financial go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and Synchrony Financial
Assuming the 90 days horizon Sumitomo Mitsui Construction is expected to under-perform the Synchrony Financial. But the stock apears to be less risky and, when comparing its historical volatility, Sumitomo Mitsui Construction is 1.39 times less risky than Synchrony Financial. The stock trades about -0.02 of its potential returns per unit of risk. The Synchrony Financial is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,053 in Synchrony Financial on October 15, 2024 and sell it today you would earn a total of 3,169 from holding Synchrony Financial or generate 103.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Mitsui Construction vs. Synchrony Financial
Performance |
| Timeline |
| Sumitomo Mitsui Cons |
| Synchrony Financial |
Sumitomo Mitsui and Synchrony Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Mitsui and Synchrony Financial
The main advantage of trading using opposite Sumitomo Mitsui and Synchrony Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, Synchrony 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 Synchrony Financial will offset losses from the drop in Synchrony Financial's long position.| Sumitomo Mitsui vs. EEDUCATION ALBERT AB | Sumitomo Mitsui vs. STRAYER EDUCATION | Sumitomo Mitsui vs. CAREER EDUCATION | Sumitomo Mitsui vs. SLR Investment Corp |
| Synchrony Financial vs. Bio Techne Corp | Synchrony Financial vs. Xiwang Special Steel | Synchrony Financial vs. Easy Software AG | Synchrony Financial vs. ACCSYS TECHPLC EO |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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