Correlation Between Hormel Foods and Synchrony Financial
Can any of the company-specific risk be diversified away by investing in both Hormel Foods 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 Hormel Foods and Synchrony Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hormel Foods and Synchrony Financial, you can compare the effects of market volatilities on Hormel Foods 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 Hormel Foods with a short position of Synchrony Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hormel Foods and Synchrony Financial.
Diversification Opportunities for Hormel Foods and Synchrony Financial
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hormel and Synchrony is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and Synchrony Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synchrony Financial and Hormel Foods 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 Hormel Foods 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 Hormel Foods i.e., Hormel Foods and Synchrony Financial go up and down completely randomly.
Pair Corralation between Hormel Foods and Synchrony Financial
Assuming the 90 days trading horizon Hormel Foods is expected to under-perform the Synchrony Financial. But the stock apears to be less risky and, when comparing its historical volatility, Hormel Foods is 1.59 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 0.09 of returns per unit of risk over similar time horizon. If you would invest 18,219 in Synchrony Financial on October 26, 2024 and sell it today you would earn a total of 23,181 from holding Synchrony Financial or generate 127.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Hormel Foods vs. Synchrony Financial
Performance |
| Timeline |
| Hormel Foods |
| Synchrony Financial |
Hormel Foods and Synchrony Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hormel Foods and Synchrony Financial
The main advantage of trading using opposite Hormel Foods and Synchrony Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hormel Foods 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.| Hormel Foods vs. Micron Technology | Hormel Foods vs. Guidewire Software, | Hormel Foods vs. United States Steel | Hormel Foods vs. UnitedHealth Group Incorporated |
| Synchrony Financial vs. Teladoc Health | Synchrony Financial vs. Automatic Data Processing | Synchrony Financial vs. ON Semiconductor | Synchrony Financial vs. CVS Health |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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