Correlation Between Alaska Air and Synchrony Financial

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

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

Diversification Opportunities for Alaska Air and Synchrony Financial

0.34

Correlation Coefficient

Alaska Air  Synchrony Financial

Weak diversification

The 3 months correlation between Alaska and Synchrony is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and Synchrony Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synchrony Financial and Alaska Air 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 Alaska Air Group 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 Alaska Air i.e., Alaska Air and Synchrony Financial go up and down completely randomly.

Pair Corralation between Alaska Air and Synchrony Financial

Assuming the 90 days trading horizon Alaska Air is expected to generate 3.91 times less return on investment than Synchrony Financial. In addition to that, Alaska Air is 1.18 times more volatile than Synchrony Financial. It trades about 0.04 of its total potential returns per unit of risk. Synchrony Financial is currently generating about 0.18 per unit of volatility. If you would invest  5,364  in Synchrony Financial on May 5, 2025 and sell it today you would earn a total of  1,344  from holding Synchrony Financial or generate 25.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.38%
Values	Daily Returns

Alaska Air Group  vs.  Synchrony Financial

Alaska Air Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alaska Air Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Alaska Air is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Synchrony Financial

Risk-Adjusted Performance

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. In spite of comparatively unsteady basic indicators, Synchrony Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alaska Air and Synchrony Financial

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

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.