Correlation Between Caledonia Investments and Synchrony Financial
Can any of the company-specific risk be diversified away by investing in both Caledonia Investments 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 Caledonia Investments and Synchrony Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caledonia Investments and Synchrony Financial, you can compare the effects of market volatilities on Caledonia Investments 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 Caledonia Investments with a short position of Synchrony Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caledonia Investments and Synchrony Financial.
Diversification Opportunities for Caledonia Investments and Synchrony Financial
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caledonia and Synchrony is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Caledonia Investments and Synchrony Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synchrony Financial and Caledonia Investments 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 Caledonia Investments 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 Caledonia Investments i.e., Caledonia Investments and Synchrony Financial go up and down completely randomly.
Pair Corralation between Caledonia Investments and Synchrony Financial
Assuming the 90 days trading horizon Caledonia Investments is expected to generate 7.65 times less return on investment than Synchrony Financial. But when comparing it to its historical volatility, Caledonia Investments is 3.07 times less risky than Synchrony Financial. It trades about 0.07 of its potential returns per unit of risk. Synchrony Financial is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 4,866 in Synchrony Financial on October 18, 2024 and sell it today you would earn a total of 1,918 from holding Synchrony Financial or generate 39.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.59% |
| Values | Daily Returns |
Caledonia Investments vs. Synchrony Financial
Performance |
| Timeline |
| Caledonia Investments |
| Synchrony Financial |
Caledonia Investments and Synchrony Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caledonia Investments and Synchrony Financial
The main advantage of trading using opposite Caledonia Investments and Synchrony Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caledonia Investments 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.| Caledonia Investments vs. Samsung Electronics Co | Caledonia Investments vs. Samsung Electronics Co | Caledonia Investments vs. Toyota Motor Corp | Caledonia Investments vs. MOL Hungarian Oil |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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