Correlation Between Synchrony Financial and OneMain Holdings

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

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

Diversification Opportunities for Synchrony Financial and OneMain Holdings

-0.04

Correlation Coefficient

Synchrony Financial  OneMain Holdings

Good diversification

The 3 months correlation between Synchrony and OneMain is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and OneMain Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OneMain Holdings 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 OneMain Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OneMain Holdings has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and OneMain Holdings go up and down completely randomly.

Pair Corralation between Synchrony Financial and OneMain Holdings

Assuming the 90 days trading horizon Synchrony Financial is expected to under-perform the OneMain Holdings. But the preferred stock apears to be less risky and, when comparing its historical volatility, Synchrony Financial is 1.59 times less risky than OneMain Holdings. The preferred stock trades about -0.05 of its potential returns per unit of risk. The OneMain Holdings is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  4,719  in OneMain Holdings on October 27, 2024 and sell it today you would earn a total of  1,042  from holding OneMain Holdings or generate 22.08% 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.  OneMain Holdings

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 somewhat strong technical and fundamental indicators, Synchrony Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

OneMain Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in OneMain Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting primary indicators, OneMain Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Synchrony Financial and OneMain Holdings

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

The idea behind Synchrony Financial and OneMain Holdings 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.