Correlation Between LendingClub Corp and Synchrony Financial
Can any of the company-specific risk be diversified away by investing in both LendingClub Corp 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 LendingClub Corp and Synchrony Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LendingClub Corp and Synchrony Financial, you can compare the effects of market volatilities on LendingClub Corp 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 LendingClub Corp with a short position of Synchrony Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of LendingClub Corp and Synchrony Financial.
Diversification Opportunities for LendingClub Corp and Synchrony Financial
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between LendingClub and Synchrony is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding LendingClub Corp and Synchrony Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synchrony Financial and LendingClub Corp 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 LendingClub Corp 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 LendingClub Corp i.e., LendingClub Corp and Synchrony Financial go up and down completely randomly.
Pair Corralation between LendingClub Corp and Synchrony Financial
Allowing for the 90-day total investment horizon LendingClub Corp is expected to generate 1.09 times less return on investment than Synchrony Financial. But when comparing it to its historical volatility, LendingClub Corp is 1.34 times less risky than Synchrony Financial. It trades about 0.25 of its potential returns per unit of risk. Synchrony Financial is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 5,653 in Synchrony Financial on August 27, 2024 and sell it today you would earn a total of 1,051 from holding Synchrony Financial or generate 18.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
LendingClub Corp vs. Synchrony Financial
Performance |
| Timeline |
| LendingClub Corp |
| Synchrony Financial |
LendingClub Corp and Synchrony Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LendingClub Corp and Synchrony Financial
The main advantage of trading using opposite LendingClub Corp and Synchrony Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LendingClub Corp 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.| LendingClub Corp vs. SLM Corp | LendingClub Corp vs. Orix Corp Ads | LendingClub Corp vs. FirstCash | LendingClub Corp vs. Medallion Financial Corp |
| Synchrony Financial vs. Capital One Financial | Synchrony Financial vs. American Express | Synchrony Financial vs. Ally Financial | Synchrony Financial vs. Mastercard |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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