Correlation Between Synchrony Financial and Zip Co
Can any of the company-specific risk be diversified away by investing in both Synchrony Financial and Zip Co 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 Synchrony Financial and Zip Co into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Synchrony Financial and Zip Co Limited, you can compare the effects of market volatilities on Synchrony Financial and Zip Co 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 Synchrony Financial with a short position of Zip Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Synchrony Financial and Zip Co.
Diversification Opportunities for Synchrony Financial and Zip Co
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Synchrony and Zip is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and Zip Co Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zip Co Limited and Synchrony Financial 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 Synchrony Financial are associated (or correlated) with Zip Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zip Co Limited has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and Zip Co go up and down completely randomly.
Pair Corralation between Synchrony Financial and Zip Co
Considering the 90-day investment horizon Synchrony Financial is expected to under-perform the Zip Co. But the stock apears to be less risky and, when comparing its historical volatility, Synchrony Financial is 2.98 times less risky than Zip Co. The stock trades about -0.34 of its potential returns per unit of risk. The Zip Co Limited is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 204.00 in Zip Co Limited on November 28, 2024 and sell it today you would lose (27.00) from holding Zip Co Limited or give up 13.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Synchrony Financial vs. Zip Co Limited
Performance |
| Timeline |
| Synchrony Financial |
| Zip Co Limited |
Synchrony Financial and Zip Co Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Synchrony Financial and Zip Co
The main advantage of trading using opposite Synchrony Financial and Zip Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Synchrony Financial position performs unexpectedly, Zip Co 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 Zip Co will offset losses from the drop in Zip Co's long position.| Synchrony Financial vs. Capital One Financial | Synchrony Financial vs. American Express | Synchrony Financial vs. Ally Financial | Synchrony Financial vs. Mastercard |
| Zip Co vs. Cosmos Group Holdings | Zip Co vs. Regional Management Corp | Zip Co vs. Enova International | Zip Co vs. Open Lending Corp |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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