Correlation Between Synchrony Financial and Metalurgica Gerdau

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

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

Diversification Opportunities for Synchrony Financial and Metalurgica Gerdau

0.55

Correlation Coefficient

Synchrony Financial  Metalurgica Gerdau

Very weak diversification

The 3 months correlation between Synchrony and Metalurgica is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and Metalurgica Gerdau SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalurgica Gerdau 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 Metalurgica Gerdau. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metalurgica Gerdau has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and Metalurgica Gerdau go up and down completely randomly.

Pair Corralation between Synchrony Financial and Metalurgica Gerdau

Assuming the 90 days trading horizon Synchrony Financial is expected to under-perform the Metalurgica Gerdau. But the stock apears to be less risky and, when comparing its historical volatility, Synchrony Financial is 1.04 times less risky than Metalurgica Gerdau. The stock trades about -0.24 of its potential returns per unit of risk. The Metalurgica Gerdau SA is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,019  in Metalurgica Gerdau SA on December 28, 2024 and sell it today you would lose (54.00) from holding Metalurgica Gerdau SA or give up 5.3% of portfolio value over 90 days.

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

Synchrony Financial  vs.  Metalurgica Gerdau SA

Synchrony Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Synchrony Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Metalurgica Gerdau

Risk-Adjusted Performance

Very Weak

Over the last 90 days Metalurgica Gerdau SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Metalurgica Gerdau is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Synchrony Financial and Metalurgica Gerdau

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

The idea behind Synchrony Financial and Metalurgica Gerdau SA 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.