Correlation Between Synchrony Financial and Direct Line
Can any of the company-specific risk be diversified away by investing in both Synchrony Financial and Direct Line 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 Direct Line into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Synchrony Financial and Direct Line Insurance, you can compare the effects of market volatilities on Synchrony Financial and Direct Line 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 Direct Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of Synchrony Financial and Direct Line.
Diversification Opportunities for Synchrony Financial and Direct Line
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Synchrony and Direct is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and Direct Line Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direct Line 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 Direct Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direct Line Insurance has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and Direct Line go up and down completely randomly.
Pair Corralation between Synchrony Financial and Direct Line
Assuming the 90 days horizon Synchrony Financial is expected to generate 2.58 times more return on investment than Direct Line. However, Synchrony Financial is 2.58 times more volatile than Direct Line Insurance. It trades about 0.14 of its potential returns per unit of risk. Direct Line Insurance is currently generating about 0.17 per unit of risk. If you would invest 6,298 in Synchrony Financial on November 4, 2024 and sell it today you would earn a total of 334.00 from holding Synchrony Financial or generate 5.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Synchrony Financial vs. Direct Line Insurance
Performance |
| Timeline |
| Synchrony Financial |
| Direct Line Insurance |
Synchrony Financial and Direct Line Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Synchrony Financial and Direct Line
The main advantage of trading using opposite Synchrony Financial and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Synchrony Financial position performs unexpectedly, Direct Line 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 Direct Line will offset losses from the drop in Direct Line's long position.| Synchrony Financial vs. TITAN MACHINERY | Synchrony Financial vs. AUST AGRICULTURAL | Synchrony Financial vs. MAGNUM MINING EXP | Synchrony Financial vs. Tokyu Construction Co |
| Direct Line vs. LIFEWAY FOODS | Direct Line vs. United Natural Foods | Direct Line vs. The Hanover Insurance | Direct Line vs. Tyson Foods |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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