Correlation Between Synchrony Financial and General Motors

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

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

Diversification Opportunities for Synchrony Financial and General Motors

0.41

Correlation Coefficient

Synchrony Financial  General Motors

Very weak diversification

The 3 months correlation between Synchrony and General is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and General Motors Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors 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 General Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and General Motors go up and down completely randomly.

Pair Corralation between Synchrony Financial and General Motors

Assuming the 90 days trading horizon Synchrony Financial is expected to under-perform the General Motors. But the stock apears to be less risky and, when comparing its historical volatility, Synchrony Financial is 1.14 times less risky than General Motors. The stock trades about -0.13 of its potential returns per unit of risk. The General Motors Co is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  5,417  in General Motors Co on December 26, 2024 and sell it today you would lose (272.00) from holding General Motors Co or give up 5.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.65%
Values	Daily Returns

Synchrony Financial  vs.  General Motors Co

Synchrony Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Synchrony Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

General Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Motors Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, General Motors is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Synchrony Financial and General Motors

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

The idea behind Synchrony Financial and General Motors Co 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.