Correlation Between Synchrony Financial and Citigroup

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

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

Diversification Opportunities for Synchrony Financial and Citigroup

0.96

Correlation Coefficient

Synchrony Financial  Citigroup

Almost no diversification

The 3 months correlation between Synchrony and Citigroup is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup 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 Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and Citigroup go up and down completely randomly.

Pair Corralation between Synchrony Financial and Citigroup

Assuming the 90 days trading horizon Synchrony Financial is expected to generate 1.57 times more return on investment than Citigroup. However, Synchrony Financial is 1.57 times more volatile than Citigroup. It trades about 0.18 of its potential returns per unit of risk. Citigroup is currently generating about 0.13 per unit of risk. If you would invest  4,921  in Synchrony Financial on September 29, 2024 and sell it today you would earn a total of  1,668  from holding Synchrony Financial or generate 33.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

Synchrony Financial  vs.  Citigroup

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.

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Citigroup unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Synchrony Financial and Citigroup

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

The idea behind Synchrony Financial and Citigroup 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.