Correlation Between Home Depot and Synchrony Financial

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Home Depot 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 Home Depot and Synchrony Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Home Depot and Synchrony Financial, you can compare the effects of market volatilities on Home Depot 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 Home Depot with a short position of Synchrony Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Synchrony Financial.

Diversification Opportunities for Home Depot and Synchrony Financial

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Home and Synchrony is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and Synchrony Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synchrony Financial and Home Depot 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 The Home Depot 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 Home Depot i.e., Home Depot and Synchrony Financial go up and down completely randomly.

Pair Corralation between Home Depot and Synchrony Financial

Assuming the 90 days trading horizon Home Depot is expected to generate 13.94 times less return on investment than Synchrony Financial. But when comparing it to its historical volatility, The Home Depot is 1.84 times less risky than Synchrony Financial. It trades about 0.03 of its potential returns per unit of risk. Synchrony Financial is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  28,220  in Synchrony Financial on October 9, 2024 and sell it today you would earn a total of  12,598  from holding Synchrony Financial or generate 44.64% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

The Home Depot  vs.  Synchrony Financial

 Performance 
       Timeline  
Home Depot 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in The Home Depot are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Home Depot is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Synchrony Financial 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Synchrony Financial are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Synchrony Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Home Depot and Synchrony Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Home Depot and Synchrony Financial

The main advantage of trading using opposite Home Depot and Synchrony Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot 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 The Home Depot 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.
Check out your portfolio center.
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

Other Complementary Tools

Portfolio Diagnostics
Use generated alerts and portfolio events aggregator to diagnose current holdings
Funds Screener
Find actively-traded funds from around the world traded on over 30 global exchanges
Competition Analyzer
Analyze and compare many basic indicators for a group of related or unrelated entities
Alpha Finder
Use alpha and beta coefficients to find investment opportunities after accounting for the risk
Piotroski F Score
Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals