Correlation Between Synovus Financial and Compass Group

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

Diversification Opportunities for Synovus Financial and Compass Group

0.49

Correlation Coefficient

Synovus Financial  Compass Group

Very weak diversification

The 3 months correlation between Synovus and Compass is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Synovus Financial Corp and Compass Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass 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 Compass Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Group PLC has no effect on the direction of Synovus Financial i.e., Synovus Financial and Compass Group go up and down completely randomly.

Pair Corralation between Synovus Financial and Compass Group

Assuming the 90 days trading horizon Synovus Financial Corp is expected to under-perform the Compass Group. In addition to that, Synovus Financial is 1.07 times more volatile than Compass Group PLC. It trades about -0.09 of its total potential returns per unit of risk. Compass Group PLC is currently generating about -0.08 per unit of volatility. If you would invest  3,168  in Compass Group PLC on December 24, 2024 and sell it today you would lose (287.00) from holding Compass Group PLC or give up 9.06% of portfolio value over 90 days.

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

Synovus Financial Corp  vs.  Compass Group PLC

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 fragile 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.

Compass Group PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Compass Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Synovus Financial and Compass Group

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

The idea behind Synovus Financial Corp and Compass 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.