Correlation Between Synchrony Financial and Federal Agricultural
Can any of the company-specific risk be diversified away by investing in both Synchrony Financial and Federal Agricultural 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 Federal Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Synchrony Financial and Federal Agricultural Mortgage, you can compare the effects of market volatilities on Synchrony Financial and Federal Agricultural 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 Federal Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Synchrony Financial and Federal Agricultural.
Diversification Opportunities for Synchrony Financial and Federal Agricultural
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Synchrony and Federal is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and Federal Agricultural Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Agricultural 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 Federal Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Agricultural has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and Federal Agricultural go up and down completely randomly.
Pair Corralation between Synchrony Financial and Federal Agricultural
Assuming the 90 days trading horizon Synchrony Financial is expected to generate 30.13 times less return on investment than Federal Agricultural. But when comparing it to its historical volatility, Synchrony Financial is 2.33 times less risky than Federal Agricultural. It trades about 0.02 of its potential returns per unit of risk. Federal Agricultural Mortgage is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 18,600 in Federal Agricultural Mortgage on August 27, 2024 and sell it today you would earn a total of 2,495 from holding Federal Agricultural Mortgage or generate 13.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Synchrony Financial vs. Federal Agricultural Mortgage
Performance |
| Timeline |
| Synchrony Financial |
| Federal Agricultural |
Synchrony Financial and Federal Agricultural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Synchrony Financial and Federal Agricultural
The main advantage of trading using opposite Synchrony Financial and Federal Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Synchrony Financial position performs unexpectedly, Federal Agricultural 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 Federal Agricultural will offset losses from the drop in Federal Agricultural's long position.| Synchrony Financial vs. Citizens Financial Group | Synchrony Financial vs. Wells Fargo | Synchrony Financial vs. Equitable Holdings |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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