Correlation Between Navient Corp and Synchrony Financial

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

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

Diversification Opportunities for Navient Corp and Synchrony Financial

0.23

Correlation Coefficient

Navient Corp  Synchrony Financial

Modest diversification

The 3 months correlation between Navient and Synchrony is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Navient Corp and Synchrony Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synchrony Financial and Navient Corp 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 Navient Corp 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 Navient Corp i.e., Navient Corp and Synchrony Financial go up and down completely randomly.

Pair Corralation between Navient Corp and Synchrony Financial

Given the investment horizon of 90 days Navient Corp is expected to generate 1.94 times more return on investment than Synchrony Financial. However, Navient Corp is 1.94 times more volatile than Synchrony Financial. It trades about -0.05 of its potential returns per unit of risk. Synchrony Financial is currently generating about -0.12 per unit of risk. If you would invest  1,598  in Navient Corp on September 19, 2024 and sell it today you would lose (123.50) from holding Navient Corp or give up 7.73% of portfolio value over 90 days.

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

Navient Corp  vs.  Synchrony Financial

Navient Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Navient Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Synchrony Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Synchrony Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Preferred Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Navient Corp and Synchrony Financial

The main advantage of trading using opposite Navient Corp and Synchrony Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Navient Corp 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 Navient Corp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.