Correlation Between Penn National and Synovus Financial

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

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

Diversification Opportunities for Penn National and Synovus Financial

0.66

Correlation Coefficient

Penn National  Synovus Financial

Poor diversification

The 3 months correlation between Penn and Synovus is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming 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 Penn National 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 Penn National Gaming 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 Penn National i.e., Penn National and Synovus Financial go up and down completely randomly.

Pair Corralation between Penn National and Synovus Financial

Given the investment horizon of 90 days Penn National Gaming is expected to generate 1.75 times more return on investment than Synovus Financial. However, Penn National is 1.75 times more volatile than Synovus Financial Corp. It trades about 0.0 of its potential returns per unit of risk. Synovus Financial Corp is currently generating about -0.14 per unit of risk. If you would invest  1,986  in Penn National Gaming on October 8, 2024 and sell it today you would lose (19.00) from holding Penn National Gaming or give up 0.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	84.21%
Values	Daily Returns

Penn National Gaming  vs.  Synovus Financial Corp

Penn National Gaming

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Penn National is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Synovus Financial Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Synovus Financial Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Synovus Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penn National and Synovus Financial

The main advantage of trading using opposite Penn National and Synovus Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penn National 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 Penn National Gaming 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.