Correlation Between NORTHEAST UTILITIES and Synchrony Financial
Can any of the company-specific risk be diversified away by investing in both NORTHEAST UTILITIES 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 NORTHEAST UTILITIES and Synchrony Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NORTHEAST UTILITIES and Synchrony Financial, you can compare the effects of market volatilities on NORTHEAST UTILITIES 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 NORTHEAST UTILITIES with a short position of Synchrony Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORTHEAST UTILITIES and Synchrony Financial.
Diversification Opportunities for NORTHEAST UTILITIES and Synchrony Financial
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NORTHEAST and Synchrony is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding NORTHEAST UTILITIES and Synchrony Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synchrony Financial and NORTHEAST UTILITIES 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 NORTHEAST UTILITIES 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 NORTHEAST UTILITIES i.e., NORTHEAST UTILITIES and Synchrony Financial go up and down completely randomly.
Pair Corralation between NORTHEAST UTILITIES and Synchrony Financial
Assuming the 90 days trading horizon NORTHEAST UTILITIES is expected to generate 0.9 times more return on investment than Synchrony Financial. However, NORTHEAST UTILITIES is 1.11 times less risky than Synchrony Financial. It trades about 0.11 of its potential returns per unit of risk. Synchrony Financial is currently generating about 0.06 per unit of risk. If you would invest 5,400 in NORTHEAST UTILITIES on November 7, 2024 and sell it today you would earn a total of 200.00 from holding NORTHEAST UTILITIES or generate 3.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.3% |
| Values | Daily Returns |
NORTHEAST UTILITIES vs. Synchrony Financial
Performance |
| Timeline |
| NORTHEAST UTILITIES |
| Synchrony Financial |
NORTHEAST UTILITIES and Synchrony Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NORTHEAST UTILITIES and Synchrony Financial
The main advantage of trading using opposite NORTHEAST UTILITIES and Synchrony Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORTHEAST UTILITIES 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.| NORTHEAST UTILITIES vs. CORNISH METALS INC | NORTHEAST UTILITIES vs. MCEWEN MINING INC | NORTHEAST UTILITIES vs. Monster Beverage Corp | NORTHEAST UTILITIES vs. SAN MIGUEL BREWERY |
| Synchrony Financial vs. CAL MAINE FOODS | Synchrony Financial vs. MeVis Medical Solutions | Synchrony Financial vs. US FOODS HOLDING | Synchrony Financial vs. Peijia Medical Limited |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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