Correlation Between Synchrony Financial and Stifel Financial

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Can any of the company-specific risk be diversified away by investing in both Synchrony Financial and Stifel 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 Synchrony Financial and Stifel Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Synchrony Financial and Stifel Financial, you can compare the effects of market volatilities on Synchrony Financial and Stifel 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 Synchrony Financial with a short position of Stifel Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Synchrony Financial and Stifel Financial.

Diversification Opportunities for Synchrony Financial and Stifel Financial

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Synchrony and Stifel is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and Stifel Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stifel Financial and Synchrony 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 Synchrony Financial are associated (or correlated) with Stifel Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stifel Financial has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and Stifel Financial go up and down completely randomly.

Pair Corralation between Synchrony Financial and Stifel Financial

Considering the 90-day investment horizon Synchrony Financial is expected to generate 1.47 times more return on investment than Stifel Financial. However, Synchrony Financial is 1.47 times more volatile than Stifel Financial. It trades about 0.1 of its potential returns per unit of risk. Stifel Financial is currently generating about 0.05 per unit of risk. If you would invest  4,101  in Synchrony Financial on December 29, 2023 and sell it today you would earn a total of  127.00  from holding Synchrony Financial or generate 3.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Synchrony Financial  vs.  Stifel Financial

 Performance 
       Timeline  
Synchrony Financial 

Risk-Adjusted Performance

9 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Synchrony Financial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Synchrony Financial may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Stifel Financial 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Stifel Financial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, Stifel Financial may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Synchrony Financial and Stifel Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Synchrony Financial and Stifel Financial

The main advantage of trading using opposite Synchrony Financial and Stifel Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Synchrony Financial position performs unexpectedly, Stifel 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 Stifel Financial will offset losses from the drop in Stifel Financial's long position.
The idea behind Synchrony Financial and Stifel 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.
Check out your portfolio center.
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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