Correlation Between Enova International and Synchrony Financial
Can any of the company-specific risk be diversified away by investing in both Enova International 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 Enova International and Synchrony Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enova International and Synchrony Financial, you can compare the effects of market volatilities on Enova International 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 Enova International with a short position of Synchrony Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enova International and Synchrony Financial.
Diversification Opportunities for Enova International and Synchrony Financial
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Enova and Synchrony is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Enova International and Synchrony Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synchrony Financial and Enova International 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 Enova International 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 Enova International i.e., Enova International and Synchrony Financial go up and down completely randomly.
Pair Corralation between Enova International and Synchrony Financial
Given the investment horizon of 90 days Enova International is expected to generate 2.16 times more return on investment than Synchrony Financial. However, Enova International is 2.16 times more volatile than Synchrony Financial. It trades about 0.25 of its potential returns per unit of risk. Synchrony Financial is currently generating about 0.05 per unit of risk. If you would invest 8,817 in Enova International on August 24, 2024 and sell it today you would earn a total of 1,385 from holding Enova International or generate 15.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enova International vs. Synchrony Financial
Performance |
| Timeline |
| Enova International |
| Synchrony Financial |
Enova International and Synchrony Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enova International and Synchrony Financial
The main advantage of trading using opposite Enova International and Synchrony Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enova International 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.| Enova International vs. Regional Management Corp | Enova International vs. Encore Capital Group | Enova International vs. Customers Bancorp | Enova International vs. Employers Holdings |
| Synchrony Financial vs. Capital One Financial | Synchrony Financial vs. Capital One Financial | Synchrony Financial vs. Citizens Financial Group | Synchrony Financial vs. Wells Fargo |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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