Correlation Between Snap and Synlogic
Can any of the company-specific risk be diversified away by investing in both Snap and Synlogic 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 Snap and Synlogic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Synlogic, you can compare the effects of market volatilities on Snap and Synlogic 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 Snap with a short position of Synlogic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Synlogic.
Diversification Opportunities for Snap and Synlogic
Good diversification
The 3 months correlation between Snap and Synlogic is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Synlogic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synlogic and Snap 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 Snap Inc are associated (or correlated) with Synlogic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synlogic has no effect on the direction of Snap i.e., Snap and Synlogic go up and down completely randomly.
Pair Corralation between Snap and Synlogic
Given the investment horizon of 90 days Snap Inc is expected to generate 0.82 times more return on investment than Synlogic. However, Snap Inc is 1.22 times less risky than Synlogic. It trades about 0.05 of its potential returns per unit of risk. Synlogic is currently generating about -0.02 per unit of risk. If you would invest 869.00 in Snap Inc on August 29, 2024 and sell it today you would earn a total of 292.00 from holding Snap Inc or generate 33.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. Synlogic
Performance |
| Timeline |
| Snap Inc |
| Synlogic |
Snap and Synlogic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Synlogic
The main advantage of trading using opposite Snap and Synlogic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, Synlogic 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 Synlogic will offset losses from the drop in Synlogic's long position.The idea behind Snap Inc and Synlogic 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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