Correlation Between United Utilities and Synchrony Financial
Can any of the company-specific risk be diversified away by investing in both United Utilities 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 United Utilities and Synchrony Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Utilities Group and Synchrony Financial, you can compare the effects of market volatilities on United Utilities 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 United Utilities with a short position of Synchrony Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Synchrony Financial.
Diversification Opportunities for United Utilities and Synchrony Financial
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and Synchrony is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Synchrony Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synchrony Financial and United Utilities 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 United Utilities Group 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 United Utilities i.e., United Utilities and Synchrony Financial go up and down completely randomly.
Pair Corralation between United Utilities and Synchrony Financial
Assuming the 90 days trading horizon United Utilities is expected to generate 7.26 times less return on investment than Synchrony Financial. But when comparing it to its historical volatility, United Utilities Group is 1.27 times less risky than Synchrony Financial. It trades about 0.01 of its potential returns per unit of risk. Synchrony Financial is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,998 in Synchrony Financial on October 14, 2024 and sell it today you would earn a total of 3,224 from holding Synchrony Financial or generate 107.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Utilities Group vs. Synchrony Financial
Performance |
| Timeline |
| United Utilities |
| Synchrony Financial |
United Utilities and Synchrony Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Synchrony Financial
The main advantage of trading using opposite United Utilities and Synchrony Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities 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.| United Utilities vs. Dentsply Sirona | United Utilities vs. TOMBADOR IRON LTD | United Utilities vs. STEEL DYNAMICS | United Utilities vs. DENTSPLY SIRONA |
| Synchrony Financial vs. COMMERCIAL VEHICLE | Synchrony Financial vs. PRECISION DRILLING P | Synchrony Financial vs. CARSALESCOM | Synchrony Financial vs. United Utilities Group |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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