Correlation Between Microsoft and Synovus Financial

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

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

Diversification Opportunities for Microsoft and Synovus Financial

0.23

Correlation Coefficient

Microsoft  Synovus Financial

Modest diversification

The 3 months correlation between Microsoft and Synovus is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft 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 Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Synovus Financial go up and down completely randomly.

Pair Corralation between Microsoft and Synovus Financial

Given the investment horizon of 90 days Microsoft is expected to under-perform the Synovus Financial. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.95 times less risky than Synovus Financial. The stock trades about -0.01 of its potential returns per unit of risk. The Synovus Financial Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,725  in Synovus Financial Corp on September 23, 2024 and sell it today you would earn a total of  1,310  from holding Synovus Financial Corp or generate 35.17% return on investment over 90 days.

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

Microsoft  vs.  Synovus Financial Corp

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Synovus Financial Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Synovus Financial Corp are ranked lower than 6 (%) 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 Microsoft and Synovus Financial

The main advantage of trading using opposite Microsoft and Synovus Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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 Microsoft 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.