Correlation Between Synchrony Financial and Auction Technology

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

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

Diversification Opportunities for Synchrony Financial and Auction Technology

0.71

Correlation Coefficient

Synchrony Financial  Auction Technology

Poor diversification

The 3 months correlation between Synchrony and Auction is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and Auction Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auction Technology 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 Auction Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auction Technology has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and Auction Technology go up and down completely randomly.

Pair Corralation between Synchrony Financial and Auction Technology

Assuming the 90 days trading horizon Synchrony Financial is expected to generate 1.27 times less return on investment than Auction Technology. But when comparing it to its historical volatility, Synchrony Financial is 1.15 times less risky than Auction Technology. It trades about 0.21 of its potential returns per unit of risk. Auction Technology Group is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  55,700  in Auction Technology Group on October 25, 2024 and sell it today you would earn a total of  4,800  from holding Auction Technology Group or generate 8.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.0%
Values	Daily Returns

Synchrony Financial  vs.  Auction Technology Group

Synchrony Financial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Synchrony Financial are ranked lower than 12 (%) 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.

Auction Technology

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Auction Technology Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Auction Technology exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Synchrony Financial and Auction Technology

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

The idea behind Synchrony Financial and Auction Technology 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.