Correlation Between Synchrony Financial and Goldman Sachs

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

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

Diversification Opportunities for Synchrony Financial and Goldman Sachs

-0.82

Correlation Coefficient

Synchrony Financial  Goldman Sachs

Pay attention - limited upside

The 3 months correlation between Synchrony and Goldman is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and Goldman Sachs BDC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs BDC 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 Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs BDC has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and Goldman Sachs go up and down completely randomly.

Pair Corralation between Synchrony Financial and Goldman Sachs

Considering the 90-day investment horizon Synchrony Financial is expected to generate 3.18 times more return on investment than Goldman Sachs. However, Synchrony Financial is 3.18 times more volatile than Goldman Sachs BDC. It trades about 0.18 of its potential returns per unit of risk. Goldman Sachs BDC is currently generating about -0.08 per unit of risk. If you would invest  4,908  in Synchrony Financial on September 1, 2024 and sell it today you would earn a total of  1,844  from holding Synchrony Financial or generate 37.57% return on investment over 90 days.

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

Synchrony Financial  vs.  Goldman Sachs BDC

Synchrony Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Synchrony Financial are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Synchrony Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Goldman Sachs BDC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs BDC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Goldman Sachs is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Synchrony Financial and Goldman Sachs

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

The idea behind Synchrony Financial and Goldman Sachs BDC 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.