Correlation Between Synovus Financial and Imperial Oil

Can any of the company-specific risk be diversified away by investing in both Synovus Financial and Imperial Oil 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 Imperial Oil 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 Imperial Oil Limited, you can compare the effects of market volatilities on Synovus Financial and Imperial Oil 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 Imperial Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Synovus Financial and Imperial Oil.

Diversification Opportunities for Synovus Financial and Imperial Oil

0.52

Correlation Coefficient

Synovus Financial  Imperial Oil

Very weak diversification

The 3 months correlation between Synovus and Imperial is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Synovus Financial Corp and Imperial Oil Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Oil Limited 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 Imperial Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Oil Limited has no effect on the direction of Synovus Financial i.e., Synovus Financial and Imperial Oil go up and down completely randomly.

Pair Corralation between Synovus Financial and Imperial Oil

Assuming the 90 days trading horizon Synovus Financial Corp is expected to under-perform the Imperial Oil. In addition to that, Synovus Financial is 1.02 times more volatile than Imperial Oil Limited. It trades about -0.07 of its total potential returns per unit of risk. Imperial Oil Limited is currently generating about 0.1 per unit of volatility. If you would invest  5,869  in Imperial Oil Limited on December 23, 2024 and sell it today you would earn a total of  685.00  from holding Imperial Oil Limited or generate 11.67% return on investment over 90 days.

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

Synovus Financial Corp  vs.  Imperial Oil Limited

Synovus Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Synovus Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain 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.

Imperial Oil Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Oil Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Imperial Oil reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Synovus Financial and Imperial Oil

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

The idea behind Synovus Financial Corp and Imperial Oil Limited 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.