Correlation Between Synchrony Financial and FORTEC ELEKTRONIK

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

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

Diversification Opportunities for Synchrony Financial and FORTEC ELEKTRONIK

0.7

Correlation Coefficient

Synchrony Financial  FORTEC ELEKTRONIK

Poor diversification

The 3 months correlation between Synchrony and FORTEC is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and FORTEC ELEKTRONIK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FORTEC ELEKTRONIK 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 FORTEC ELEKTRONIK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FORTEC ELEKTRONIK has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and FORTEC ELEKTRONIK go up and down completely randomly.

Pair Corralation between Synchrony Financial and FORTEC ELEKTRONIK

Assuming the 90 days horizon Synchrony Financial is expected to under-perform the FORTEC ELEKTRONIK. But the stock apears to be less risky and, when comparing its historical volatility, Synchrony Financial is 1.39 times less risky than FORTEC ELEKTRONIK. The stock trades about -0.16 of its potential returns per unit of risk. The FORTEC ELEKTRONIK is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,743  in FORTEC ELEKTRONIK on December 23, 2024 and sell it today you would lose (183.00) from holding FORTEC ELEKTRONIK or give up 10.5% of portfolio value over 90 days.

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

Synchrony Financial  vs.  FORTEC ELEKTRONIK

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

FORTEC ELEKTRONIK

Risk-Adjusted Performance

Very Weak

Over the last 90 days FORTEC ELEKTRONIK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Synchrony Financial and FORTEC ELEKTRONIK

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

The idea behind Synchrony Financial and FORTEC ELEKTRONIK 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.