Correlation Between Synovus Financial and AIB Group

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

By analyzing existing cross correlation between Synovus Financial Corp and AIB Group plc, you can compare the effects of market volatilities on Synovus Financial and AIB Group 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 Synovus Financial with a short position of AIB Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Synovus Financial and AIB Group.

Diversification Opportunities for Synovus Financial and AIB Group

0.37

Correlation Coefficient

Synovus Financial  AIB Group

Weak diversification

The 3 months correlation between Synovus and AIB is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Synovus Financial Corp and AIB Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIB Group plc and Synovus 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 Synovus Financial Corp are associated (or correlated) with AIB Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIB Group plc has no effect on the direction of Synovus Financial i.e., Synovus Financial and AIB Group go up and down completely randomly.

Pair Corralation between Synovus Financial and AIB Group

Assuming the 90 days trading horizon Synovus Financial Corp is expected to under-perform the AIB Group. But the stock apears to be less risky and, when comparing its historical volatility, Synovus Financial Corp is 1.04 times less risky than AIB Group. The stock trades about -0.21 of its potential returns per unit of risk. The AIB Group plc is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  537.00  in AIB Group plc on September 23, 2024 and sell it today you would lose (30.00) from holding AIB Group plc or give up 5.59% of portfolio value over 90 days.

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

Synovus Financial Corp  vs.  AIB Group plc

Synovus Financial Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Synovus Financial Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Synovus Financial reported solid returns over the last few months and may actually be approaching a breakup point.

AIB Group plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AIB Group plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, AIB Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Synovus Financial and AIB Group

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

The idea behind Synovus Financial Corp and AIB Group plc 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 Transaction History module to view history of all your transactions and understand their impact on performance.