Correlation Between Synchrony Financial and Daimler Truck

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

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

Diversification Opportunities for Synchrony Financial and Daimler Truck

-0.3

Correlation Coefficient

Synchrony Financial  Daimler Truck

Very good diversification

The 3 months correlation between Synchrony and Daimler is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and Daimler Truck Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daimler Truck Holding 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 Daimler Truck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daimler Truck Holding has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and Daimler Truck go up and down completely randomly.

Pair Corralation between Synchrony Financial and Daimler Truck

Assuming the 90 days horizon Synchrony Financial is expected to generate 0.64 times more return on investment than Daimler Truck. However, Synchrony Financial is 1.55 times less risky than Daimler Truck. It trades about 0.23 of its potential returns per unit of risk. Daimler Truck Holding is currently generating about 0.13 per unit of risk. If you would invest  6,281  in Synchrony Financial on October 26, 2024 and sell it today you would earn a total of  462.00  from holding Synchrony Financial or generate 7.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Synchrony Financial  vs.  Daimler Truck Holding

Synchrony Financial

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Synchrony Financial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Synchrony Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Daimler Truck Holding

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Daimler Truck Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Daimler Truck is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Synchrony Financial and Daimler Truck

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

The idea behind Synchrony Financial and Daimler Truck Holding 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..