Correlation Between Synchrony Financial and HSBC Holdings
Can any of the company-specific risk be diversified away by investing in both Synchrony Financial and HSBC Holdings 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 Synchrony Financial and HSBC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Synchrony Financial and HSBC Holdings plc, you can compare the effects of market volatilities on Synchrony Financial and HSBC Holdings 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 Synchrony Financial with a short position of HSBC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Synchrony Financial and HSBC Holdings.
Diversification Opportunities for Synchrony Financial and HSBC Holdings
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Synchrony and HSBC is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and HSBC Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC Holdings plc and Synchrony Financial 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 Synchrony Financial are associated (or correlated) with HSBC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC Holdings plc has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and HSBC Holdings go up and down completely randomly.
Pair Corralation between Synchrony Financial and HSBC Holdings
Assuming the 90 days trading horizon Synchrony Financial is expected to generate 1.04 times less return on investment than HSBC Holdings. But when comparing it to its historical volatility, Synchrony Financial is 1.58 times less risky than HSBC Holdings. It trades about 0.09 of its potential returns per unit of risk. HSBC Holdings plc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,909 in HSBC Holdings plc on October 27, 2024 and sell it today you would earn a total of 3,699 from holding HSBC Holdings plc or generate 94.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Synchrony Financial vs. HSBC Holdings plc
Performance |
| Timeline |
| Synchrony Financial |
| HSBC Holdings plc |
Synchrony Financial and HSBC Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Synchrony Financial and HSBC Holdings
The main advantage of trading using opposite Synchrony Financial and HSBC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Synchrony Financial position performs unexpectedly, HSBC Holdings 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 HSBC Holdings will offset losses from the drop in HSBC Holdings' long position.| Synchrony Financial vs. Teladoc Health | Synchrony Financial vs. Automatic Data Processing | Synchrony Financial vs. ON Semiconductor | Synchrony Financial vs. CVS Health |
| HSBC Holdings vs. Patria Investments Limited | HSBC Holdings vs. Omega Healthcare Investors, | HSBC Holdings vs. Ross Stores | HSBC Holdings vs. Clover Health Investments, |
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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