Correlation Between Alien Metals and Synchrony Financial

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

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

Diversification Opportunities for Alien Metals and Synchrony Financial

0.61

Correlation Coefficient

Alien Metals  Synchrony Financial

Poor diversification

The 3 months correlation between Alien and Synchrony is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Alien Metals and Synchrony Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synchrony Financial and Alien Metals 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 Alien Metals 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 Alien Metals i.e., Alien Metals and Synchrony Financial go up and down completely randomly.

Pair Corralation between Alien Metals and Synchrony Financial

Assuming the 90 days trading horizon Alien Metals is expected to under-perform the Synchrony Financial. In addition to that, Alien Metals is 1.89 times more volatile than Synchrony Financial. It trades about -0.09 of its total potential returns per unit of risk. Synchrony Financial is currently generating about -0.16 per unit of volatility. If you would invest  6,528  in Synchrony Financial on December 23, 2024 and sell it today you would lose (1,130) from holding Synchrony Financial or give up 17.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.65%
Values	Daily Returns

Alien Metals  vs.  Synchrony Financial

Alien Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alien Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Alien Metals and Synchrony Financial

The main advantage of trading using opposite Alien Metals and Synchrony Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alien Metals 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 Alien Metals 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.