Correlation Between Synchrony Financial and ConocoPhillips

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

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

Diversification Opportunities for Synchrony Financial and ConocoPhillips

0.18

Correlation Coefficient

Synchrony Financial  ConocoPhillips

Average diversification

The 3 months correlation between Synchrony and ConocoPhillips is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips and Synchrony Financial 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 Synchrony Financial are associated (or correlated) with ConocoPhillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConocoPhillips has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and ConocoPhillips go up and down completely randomly.

Pair Corralation between Synchrony Financial and ConocoPhillips

Assuming the 90 days trading horizon Synchrony Financial is expected to generate 1.21 times more return on investment than ConocoPhillips. However, Synchrony Financial is 1.21 times more volatile than ConocoPhillips. It trades about 0.09 of its potential returns per unit of risk. ConocoPhillips is currently generating about 0.02 per unit of risk. If you would invest  18,104  in Synchrony Financial on October 23, 2024 and sell it today you would earn a total of  23,496  from holding Synchrony Financial or generate 129.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.79%
Values	Daily Returns

Synchrony Financial  vs.  ConocoPhillips

Synchrony Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Synchrony Financial are ranked lower than 13 (%) 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.

ConocoPhillips

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ConocoPhillips are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ConocoPhillips may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Synchrony Financial and ConocoPhillips

The main advantage of trading using opposite Synchrony Financial and ConocoPhillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Synchrony Financial position performs unexpectedly, ConocoPhillips 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 ConocoPhillips will offset losses from the drop in ConocoPhillips' long position.

The idea behind Synchrony Financial and ConocoPhillips 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.