Correlation Between DXC Technology and Synchrony Financial
Can any of the company-specific risk be diversified away by investing in both DXC 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 DXC 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 DXC Technology and Synchrony Financial, you can compare the effects of market volatilities on DXC 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 DXC Technology with a short position of Synchrony Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of DXC Technology and Synchrony Financial.
Diversification Opportunities for DXC Technology and Synchrony Financial
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between DXC and Synchrony is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding DXC Technology and Synchrony Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synchrony Financial and DXC 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 DXC Technology 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 DXC Technology i.e., DXC Technology and Synchrony Financial go up and down completely randomly.
Pair Corralation between DXC Technology and Synchrony Financial
Assuming the 90 days trading horizon DXC Technology is expected to generate 1.31 times more return on investment than Synchrony Financial. However, DXC Technology is 1.31 times more volatile than Synchrony Financial. It trades about 0.16 of its potential returns per unit of risk. Synchrony Financial is currently generating about 0.19 per unit of risk. If you would invest 10,679 in DXC Technology on October 7, 2024 and sell it today you would earn a total of 2,761 from holding DXC Technology or generate 25.85% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
DXC Technology vs. Synchrony Financial
Performance |
Timeline |
DXC Technology |
Synchrony Financial |
DXC Technology and Synchrony Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with DXC Technology and Synchrony Financial
The main advantage of trading using opposite DXC Technology and Synchrony Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DXC 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.DXC Technology vs. CVS Health | DXC Technology vs. Teladoc Health | DXC Technology vs. Clover Health Investments, | DXC Technology vs. British American Tobacco |
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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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