Correlation Between Synchrony Financial and Universal Insurance
Can any of the company-specific risk be diversified away by investing in both Synchrony Financial and Universal Insurance 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 Universal Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Synchrony Financial and Universal Insurance Holdings, you can compare the effects of market volatilities on Synchrony Financial and Universal Insurance 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 Universal Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Synchrony Financial and Universal Insurance.
Diversification Opportunities for Synchrony Financial and Universal Insurance
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Synchrony and Universal is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and Universal Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Insurance 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 Universal Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Insurance has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and Universal Insurance go up and down completely randomly.
Pair Corralation between Synchrony Financial and Universal Insurance
Assuming the 90 days horizon Synchrony Financial is expected to generate 0.99 times more return on investment than Universal Insurance. However, Synchrony Financial is 1.01 times less risky than Universal Insurance. It trades about -0.07 of its potential returns per unit of risk. Universal Insurance Holdings is currently generating about -0.24 per unit of risk. If you would invest 6,538 in Synchrony Financial on October 13, 2024 and sell it today you would lose (136.00) from holding Synchrony Financial or give up 2.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Synchrony Financial vs. Universal Insurance Holdings
Performance |
| Timeline |
| Synchrony Financial |
| Universal Insurance |
Synchrony Financial and Universal Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Synchrony Financial and Universal Insurance
The main advantage of trading using opposite Synchrony Financial and Universal Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Synchrony Financial position performs unexpectedly, Universal Insurance 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 Universal Insurance will offset losses from the drop in Universal Insurance's long position.| Synchrony Financial vs. Visa Inc | Synchrony Financial vs. Discover Financial Services | Synchrony Financial vs. Superior Plus Corp | Synchrony Financial vs. NMI Holdings |
| Universal Insurance vs. Synchrony Financial | Universal Insurance vs. Erste Group Bank | Universal Insurance vs. InterContinental Hotels Group | Universal Insurance vs. UNIQA INSURANCE GR |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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