Correlation Between Stellar and Synchrony Financial
Can any of the company-specific risk be diversified away by investing in both Stellar 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 Stellar and Synchrony Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stellar and Synchrony Financial, you can compare the effects of market volatilities on Stellar 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 Stellar with a short position of Synchrony Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stellar and Synchrony Financial.
Diversification Opportunities for Stellar and Synchrony Financial
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Stellar and Synchrony is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and Synchrony Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synchrony Financial and Stellar 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 Stellar 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 Stellar i.e., Stellar and Synchrony Financial go up and down completely randomly.
Pair Corralation between Stellar and Synchrony Financial
Assuming the 90 days trading horizon Stellar is expected to generate 3.17 times more return on investment than Synchrony Financial. However, Stellar is 3.17 times more volatile than Synchrony Financial. It trades about 0.13 of its potential returns per unit of risk. Synchrony Financial is currently generating about 0.15 per unit of risk. If you would invest 11.00 in Stellar on October 12, 2024 and sell it today you would earn a total of 28.00 from holding Stellar or generate 254.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 89.25% |
| Values | Daily Returns |
Stellar vs. Synchrony Financial
Performance |
| Timeline |
| Stellar |
| Synchrony Financial |
Stellar and Synchrony Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stellar and Synchrony Financial
The main advantage of trading using opposite Stellar and Synchrony Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stellar 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.The idea behind Stellar and Synchrony Financial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Synchrony Financial vs. Hormel Foods | Synchrony Financial vs. Clover Health Investments, | Synchrony Financial vs. Unifique Telecomunicaes SA | Synchrony Financial vs. Ares Management |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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