Correlation Between Spotify Technology and Synchrony Financial
Can any of the company-specific risk be diversified away by investing in both Spotify Technology 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 Spotify Technology and Synchrony Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spotify Technology SA and Synchrony Financial, you can compare the effects of market volatilities on Spotify Technology 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 Spotify Technology with a short position of Synchrony Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spotify Technology and Synchrony Financial.
Diversification Opportunities for Spotify Technology and Synchrony Financial
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Spotify and Synchrony is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Spotify Technology SA and Synchrony Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synchrony Financial and Spotify Technology 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 Spotify Technology SA 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 Spotify Technology i.e., Spotify Technology and Synchrony Financial go up and down completely randomly.
Pair Corralation between Spotify Technology and Synchrony Financial
Assuming the 90 days trading horizon Spotify Technology is expected to generate 1.02 times less return on investment than Synchrony Financial. But when comparing it to its historical volatility, Spotify Technology SA is 1.05 times less risky than Synchrony Financial. It trades about 0.13 of its potential returns per unit of risk. Synchrony Financial is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 4,255 in Synchrony Financial on October 13, 2024 and sell it today you would earn a total of 2,182 from holding Synchrony Financial or generate 51.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.92% |
| Values | Daily Returns |
Spotify Technology SA vs. Synchrony Financial
Performance |
| Timeline |
| Spotify Technology |
| Synchrony Financial |
Spotify Technology and Synchrony Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spotify Technology and Synchrony Financial
The main advantage of trading using opposite Spotify Technology and Synchrony Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spotify Technology 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.| Spotify Technology vs. Tavistock Investments Plc | Spotify Technology vs. Caledonia Investments | Spotify Technology vs. Wizz Air Holdings | Spotify Technology vs. Gear4music Plc |
| Synchrony Financial vs. Aptitude Software Group | Synchrony Financial vs. Datalogic | Synchrony Financial vs. Spotify Technology SA | Synchrony Financial vs. Alliance Data Systems |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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