Correlation Between International Business and Synovus Financial

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

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

Diversification Opportunities for International Business and Synovus Financial

-0.05

Correlation Coefficient

International Business  Synovus Financial

Good diversification

The 3 months correlation between International and Synovus is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine 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 International Business 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 International Business Machines 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 International Business i.e., International Business and Synovus Financial go up and down completely randomly.

Pair Corralation between International Business and Synovus Financial

Considering the 90-day investment horizon International Business is expected to generate 1.04 times less return on investment than Synovus Financial. But when comparing it to its historical volatility, International Business Machines is 2.06 times less risky than Synovus Financial. It trades about 0.09 of its potential returns per unit of risk. Synovus Financial Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,305  in Synovus Financial Corp on October 4, 2024 and sell it today you would earn a total of  1,595  from holding Synovus Financial Corp or generate 48.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.8%
Values	Daily Returns

International Business Machine  vs.  Synovus Financial Corp

International Business

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Business Machines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, International Business is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Synovus Financial Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Synovus Financial Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Synovus Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Business and Synovus Financial

The main advantage of trading using opposite International Business and Synovus Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business 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 International Business Machines 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.