Correlation Between First Interstate and Synovus Financial

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

By analyzing existing cross correlation between First Interstate BancSystem and Synovus Financial Corp, you can compare the effects of market volatilities on First Interstate and Synovus 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 First Interstate with a short position of Synovus Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Interstate and Synovus Financial.

Diversification Opportunities for First Interstate and Synovus Financial

0.94

Correlation Coefficient

First Interstate  Synovus Financial

Almost no diversification

The 3 months correlation between First and Synovus is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding First Interstate BancSystem and Synovus Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synovus Financial Corp and First Interstate 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 First Interstate BancSystem are associated (or correlated) with Synovus Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synovus Financial Corp has no effect on the direction of First Interstate i.e., First Interstate and Synovus Financial go up and down completely randomly.

Pair Corralation between First Interstate and Synovus Financial

Given the investment horizon of 90 days First Interstate BancSystem is expected to generate 0.98 times more return on investment than Synovus Financial. However, First Interstate BancSystem is 1.02 times less risky than Synovus Financial. It trades about -0.17 of its potential returns per unit of risk. Synovus Financial Corp is currently generating about -0.21 per unit of risk. If you would invest  3,450  in First Interstate BancSystem on October 5, 2024 and sell it today you would lose (203.00) from holding First Interstate BancSystem or give up 5.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

First Interstate BancSystem  vs.  Synovus Financial Corp

First Interstate Ban

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Interstate BancSystem are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental drivers, First Interstate disclosed solid returns over the last few months and may actually be approaching a breakup point.

Synovus Financial Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Synovus Financial Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Synovus Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Interstate and Synovus Financial

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

The idea behind First Interstate BancSystem and Synovus Financial Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.