Correlation Between Synchrony Financial and Old Market

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

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

Diversification Opportunities for Synchrony Financial and Old Market

0.24

Correlation Coefficient

Synchrony Financial  Old Market

Modest diversification

The 3 months correlation between Synchrony and Old is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and Old Market Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Market Capital 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 Old Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Market Capital has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and Old Market go up and down completely randomly.

Pair Corralation between Synchrony Financial and Old Market

Assuming the 90 days trading horizon Synchrony Financial is expected to generate 3.39 times less return on investment than Old Market. But when comparing it to its historical volatility, Synchrony Financial is 5.82 times less risky than Old Market. It trades about 0.08 of its potential returns per unit of risk. Old Market Capital is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  448.00  in Old Market Capital on December 3, 2024 and sell it today you would earn a total of  174.00  from holding Old Market Capital or generate 38.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	79.88%
Values	Daily Returns

Synchrony Financial  vs.  Old Market Capital

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

Old Market Capital

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Old Market Capital are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Old Market may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Synchrony Financial and Old Market

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

The idea behind Synchrony Financial and Old Market Capital 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.