Correlation Between Synchrony Financial and Alaska Air

Can any of the company-specific risk be diversified away by investing in both Synchrony Financial and Alaska Air 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 Alaska Air into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Synchrony Financial and Alaska Air Group, you can compare the effects of market volatilities on Synchrony Financial and Alaska Air 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 Alaska Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Synchrony Financial and Alaska Air.

Diversification Opportunities for Synchrony Financial and Alaska Air

0.91

Correlation Coefficient

Synchrony Financial  Alaska Air

Almost no diversification

The 3 months correlation between Synchrony and Alaska is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and Alaska Air Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alaska Air Group 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 Alaska Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alaska Air Group has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and Alaska Air go up and down completely randomly.

Pair Corralation between Synchrony Financial and Alaska Air

Assuming the 90 days trading horizon Synchrony Financial is expected to generate 1.11 times less return on investment than Alaska Air. In addition to that, Synchrony Financial is 1.25 times more volatile than Alaska Air Group. It trades about 0.22 of its total potential returns per unit of risk. Alaska Air Group is currently generating about 0.3 per unit of volatility. If you would invest  4,157  in Alaska Air Group on September 14, 2024 and sell it today you would earn a total of  2,294  from holding Alaska Air Group or generate 55.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Synchrony Financial  vs.  Alaska Air Group

Synchrony Financial

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Synchrony Financial are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Synchrony Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Alaska Air Group

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alaska Air Group are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Alaska Air unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Synchrony Financial and Alaska Air

The main advantage of trading using opposite Synchrony Financial and Alaska Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Synchrony Financial position performs unexpectedly, Alaska Air 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 Alaska Air will offset losses from the drop in Alaska Air's long position.

The idea behind Synchrony Financial and Alaska Air Group 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.