Correlation Between Capital One and Synchrony Financial
Can any of the company-specific risk be diversified away by investing in both Capital One 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 Capital One and Synchrony Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital One Financial and Synchrony Financial, you can compare the effects of market volatilities on Capital One 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 Capital One with a short position of Synchrony Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital One and Synchrony Financial.
Diversification Opportunities for Capital One and Synchrony Financial
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Capital and Synchrony is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Synchrony Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synchrony Financial and Capital One 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 Capital One Financial 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 Capital One i.e., Capital One and Synchrony Financial go up and down completely randomly.
Pair Corralation between Capital One and Synchrony Financial
Assuming the 90 days trading horizon Capital One Financial is expected to under-perform the Synchrony Financial. But the preferred stock apears to be less risky and, when comparing its historical volatility, Capital One Financial is 1.18 times less risky than Synchrony Financial. The preferred stock trades about -0.21 of its potential returns per unit of risk. The Synchrony Financial is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest 2,128 in Synchrony Financial on September 12, 2024 and sell it today you would lose (79.00) from holding Synchrony Financial or give up 3.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital One Financial vs. Synchrony Financial
Performance |
| Timeline |
| Capital One Financial |
| Synchrony Financial |
Capital One and Synchrony Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital One and Synchrony Financial
The main advantage of trading using opposite Capital One and Synchrony Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One 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.| Capital One vs. Synchrony Financial | Capital One vs. Synchrony Financial | Capital One vs. Atlanticus Holdings Corp | Capital One vs. Medallion Bank PR |
| Synchrony Financial vs. Babcock Wilcox Enterprises | Synchrony Financial vs. XOMA Corporation | Synchrony Financial vs. Brighthouse Financial | Synchrony Financial vs. Presidio Property Trust |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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