Correlation Between Smithson Investment and Synchrony Financial
Can any of the company-specific risk be diversified away by investing in both Smithson Investment 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 Smithson Investment and Synchrony Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smithson Investment Trust and Synchrony Financial, you can compare the effects of market volatilities on Smithson Investment 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 Smithson Investment with a short position of Synchrony Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smithson Investment and Synchrony Financial.
Diversification Opportunities for Smithson Investment and Synchrony Financial
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Smithson and Synchrony is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Smithson Investment Trust and Synchrony Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synchrony Financial and Smithson Investment 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 Smithson Investment Trust 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 Smithson Investment i.e., Smithson Investment and Synchrony Financial go up and down completely randomly.
Pair Corralation between Smithson Investment and Synchrony Financial
Assuming the 90 days trading horizon Smithson Investment is expected to generate 2.02 times less return on investment than Synchrony Financial. But when comparing it to its historical volatility, Smithson Investment Trust is 1.82 times less risky than Synchrony Financial. It trades about 0.18 of its potential returns per unit of risk. Synchrony Financial is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 6,669 in Synchrony Financial on October 25, 2024 and sell it today you would earn a total of 375.00 from holding Synchrony Financial or generate 5.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 89.47% |
| Values | Daily Returns |
Smithson Investment Trust vs. Synchrony Financial
Performance |
| Timeline |
| Smithson Investment Trust |
| Synchrony Financial |
Smithson Investment and Synchrony Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smithson Investment and Synchrony Financial
The main advantage of trading using opposite Smithson Investment and Synchrony Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smithson Investment 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.| Smithson Investment vs. Check Point Software | Smithson Investment vs. Thor Mining PLC | Smithson Investment vs. Fresenius Medical Care | Smithson Investment vs. Take Two Interactive Software |
| Synchrony Financial vs. Smithson Investment Trust | Synchrony Financial vs. Diversified Energy | Synchrony Financial vs. Schroders Investment Trusts | Synchrony Financial vs. Tavistock Investments Plc |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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