Correlation Between Synchrony Financial and Omeros

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

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

Diversification Opportunities for Synchrony Financial and Omeros

0.81

Correlation Coefficient

Synchrony Financial  Omeros

Very poor diversification

The 3 months correlation between Synchrony and Omeros is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and Omeros in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omeros 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 Omeros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Omeros has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and Omeros go up and down completely randomly.

Pair Corralation between Synchrony Financial and Omeros

Assuming the 90 days horizon Synchrony Financial is expected to generate 4.25 times less return on investment than Omeros. But when comparing it to its historical volatility, Synchrony Financial is 7.18 times less risky than Omeros. It trades about 0.06 of its potential returns per unit of risk. Omeros is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,009  in Omeros on October 11, 2024 and sell it today you would lose (35.00) from holding Omeros or give up 3.47% of portfolio value over 90 days.

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

Synchrony Financial  vs.  Omeros

Synchrony Financial

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Synchrony Financial are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Synchrony Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Omeros

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Omeros are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Omeros reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Synchrony Financial and Omeros

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

The idea behind Synchrony Financial and Omeros 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.