Correlation Between Synchrony Financial and Pentair Plc
Can any of the company-specific risk be diversified away by investing in both Synchrony Financial and Pentair Plc 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 Pentair Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Synchrony Financial and Pentair plc, you can compare the effects of market volatilities on Synchrony Financial and Pentair Plc 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 Pentair Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Synchrony Financial and Pentair Plc.
Diversification Opportunities for Synchrony Financial and Pentair Plc
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Synchrony and Pentair is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and Pentair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair 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 Pentair Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentair plc has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and Pentair Plc go up and down completely randomly.
Pair Corralation between Synchrony Financial and Pentair Plc
Assuming the 90 days trading horizon Synchrony Financial is expected to generate 1.26 times more return on investment than Pentair Plc. However, Synchrony Financial is 1.26 times more volatile than Pentair plc. It trades about -0.04 of its potential returns per unit of risk. Pentair plc is currently generating about -0.32 per unit of risk. If you would invest 40,640 in Synchrony Financial on October 11, 2024 and sell it today you would lose (510.00) from holding Synchrony Financial or give up 1.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Synchrony Financial vs. Pentair plc
Performance |
| Timeline |
| Synchrony Financial |
| Pentair plc |
Synchrony Financial and Pentair Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Synchrony Financial and Pentair Plc
The main advantage of trading using opposite Synchrony Financial and Pentair Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Synchrony Financial position performs unexpectedly, Pentair Plc 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 Pentair Plc will offset losses from the drop in Pentair Plc's long position.| Synchrony Financial vs. Hormel Foods | Synchrony Financial vs. Clover Health Investments, | Synchrony Financial vs. Unifique Telecomunicaes SA | Synchrony Financial vs. Ares Management |
| Pentair Plc vs. Taiwan Semiconductor Manufacturing | Pentair Plc vs. Apple Inc | Pentair Plc vs. Alibaba Group Holding | Pentair Plc vs. Banco Santander Chile |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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