Correlation Between Synchrony Financial and Aluminum

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

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

Diversification Opportunities for Synchrony Financial and Aluminum

-0.06

Correlation Coefficient

Synchrony Financial  Aluminum

Good diversification

The 3 months correlation between Synchrony and Aluminum is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and Aluminum of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aluminum 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 Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aluminum has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and Aluminum go up and down completely randomly.

Pair Corralation between Synchrony Financial and Aluminum

Assuming the 90 days horizon Synchrony Financial is expected to generate 1.07 times less return on investment than Aluminum. But when comparing it to its historical volatility, Synchrony Financial is 1.64 times less risky than Aluminum. It trades about 0.08 of its potential returns per unit of risk. Aluminum of is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  32.00  in Aluminum of on October 25, 2024 and sell it today you would earn a total of  27.00  from holding Aluminum of or generate 84.38% return on investment over 90 days.

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

Synchrony Financial  vs.  Aluminum of

Synchrony Financial

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Synchrony Financial are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Synchrony Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Aluminum

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aluminum of are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aluminum may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Synchrony Financial and Aluminum

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

The idea behind Synchrony Financial and Aluminum of 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.