Correlation Between European Metals and Synchrony Financial

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

By analyzing existing cross correlation between European Metals Holdings and Synchrony Financial, you can compare the effects of market volatilities on European Metals 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 European Metals with a short position of Synchrony Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Metals and Synchrony Financial.

Diversification Opportunities for European Metals and Synchrony Financial

-0.57

Correlation Coefficient

European Metals  Synchrony Financial

Excellent diversification

The 3 months correlation between European and Synchrony is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and Synchrony Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synchrony Financial and European Metals 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 European Metals Holdings 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 European Metals i.e., European Metals and Synchrony Financial go up and down completely randomly.

Pair Corralation between European Metals and Synchrony Financial

Assuming the 90 days trading horizon European Metals Holdings is expected to under-perform the Synchrony Financial. In addition to that, European Metals is 1.82 times more volatile than Synchrony Financial. It trades about -0.05 of its total potential returns per unit of risk. Synchrony Financial is currently generating about 0.0 per unit of volatility. If you would invest  6,686  in Synchrony Financial on September 27, 2024 and sell it today you would lose (17.00) from holding Synchrony Financial or give up 0.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

European Metals Holdings  vs.  Synchrony Financial

European Metals Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days European Metals Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, European Metals is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Synchrony Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Synchrony Financial are ranked lower than 14 (%) 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.

Pair Trading with European Metals and Synchrony Financial

The main advantage of trading using opposite European Metals and Synchrony Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Metals 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 European Metals Holdings 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.

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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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.