Correlation Between Synchrony Financial and Navient Corp

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

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

Diversification Opportunities for Synchrony Financial and Navient Corp

0.23

Correlation Coefficient

Synchrony Financial  Navient Corp

Modest diversification

The 3 months correlation between Synchrony and Navient is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and Navient Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Navient Corp 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 Navient Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Navient Corp has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and Navient Corp go up and down completely randomly.

Pair Corralation between Synchrony Financial and Navient Corp

Assuming the 90 days trading horizon Synchrony Financial is expected to under-perform the Navient Corp. But the preferred stock apears to be less risky and, when comparing its historical volatility, Synchrony Financial is 1.94 times less risky than Navient Corp. The preferred stock trades about -0.12 of its potential returns per unit of risk. The Navient Corp is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,598  in Navient Corp on September 19, 2024 and sell it today you would lose (123.50) from holding Navient Corp or give up 7.73% of portfolio value over 90 days.

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

Synchrony Financial  vs.  Navient Corp

Synchrony Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Synchrony Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Preferred Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Navient Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Navient Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Synchrony Financial and Navient Corp

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

The idea behind Synchrony Financial and Navient Corp 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..