Correlation Between Triad Group and Synchrony Financial

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

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

Diversification Opportunities for Triad Group and Synchrony Financial

0.87

Correlation Coefficient

Triad Group  Synchrony Financial

Very poor diversification

The 3 months correlation between Triad and Synchrony is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Triad Group PLC and Synchrony Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synchrony Financial and Triad Group 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 Triad Group PLC are associated (or correlated) with Synchrony Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synchrony Financial has no effect on the direction of Triad Group i.e., Triad Group and Synchrony Financial go up and down completely randomly.

Pair Corralation between Triad Group and Synchrony Financial

Assuming the 90 days trading horizon Triad Group is expected to generate 9.27 times less return on investment than Synchrony Financial. But when comparing it to its historical volatility, Triad Group PLC is 1.41 times less risky than Synchrony Financial. It trades about 0.03 of its potential returns per unit of risk. Synchrony Financial is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  4,927  in Synchrony Financial on September 1, 2024 and sell it today you would earn a total of  1,825  from holding Synchrony Financial or generate 37.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Triad Group PLC  vs.  Synchrony Financial

Triad Group PLC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Triad Group PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Triad Group is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Synchrony Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Synchrony Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Synchrony Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Triad Group and Synchrony Financial

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

The idea behind Triad Group PLC and Synchrony Financial 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.