Correlation Between Ford and Synchrony Financial
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Synchrony Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Synchrony Financial, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Synchrony Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Synchrony Financial.
Diversification Opportunities for Ford and Synchrony Financial
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Synchrony is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Synchrony Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synchrony Financial and Ford 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 Ford Motor 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 Ford i.e., Ford and Synchrony Financial go up and down completely randomly.
Pair Corralation between Ford and Synchrony Financial
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Synchrony Financial. In addition to that, Ford is 2.11 times more volatile than Synchrony Financial. It trades about 0.0 of its total potential returns per unit of risk. Synchrony Financial is currently generating about 0.05 per unit of volatility. If you would invest 2,027 in Synchrony Financial on August 24, 2024 and sell it today you would earn a total of 25.00 from holding Synchrony Financial or generate 1.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Synchrony Financial
Performance |
| Timeline |
| Ford Motor |
| Synchrony Financial |
Ford and Synchrony Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Synchrony Financial
The main advantage of trading using opposite Ford and Synchrony Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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.The idea behind Ford Motor and Synchrony Financial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Synchrony Financial vs. Capital One Financial | Synchrony Financial vs. Capital One Financial | Synchrony Financial vs. Citizens Financial Group | Synchrony Financial vs. Wells Fargo |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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