Correlation Between FirstCash and Synchrony Financial

Can any of the company-specific risk be diversified away by investing in both FirstCash 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 FirstCash and Synchrony Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FirstCash and Synchrony Financial, you can compare the effects of market volatilities on FirstCash 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 FirstCash with a short position of Synchrony Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of FirstCash and Synchrony Financial.

Diversification Opportunities for FirstCash and Synchrony Financial

0.49

Correlation Coefficient

FirstCash  Synchrony Financial

Very weak diversification

The 3 months correlation between FirstCash and Synchrony is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding FirstCash and Synchrony Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synchrony Financial and FirstCash 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 FirstCash 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 FirstCash i.e., FirstCash and Synchrony Financial go up and down completely randomly.

Pair Corralation between FirstCash and Synchrony Financial

Given the investment horizon of 90 days FirstCash is expected to generate 1.56 times less return on investment than Synchrony Financial. But when comparing it to its historical volatility, FirstCash is 1.03 times less risky than Synchrony Financial. It trades about 0.03 of its potential returns per unit of risk. Synchrony Financial is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,458  in Synchrony Financial on September 19, 2024 and sell it today you would earn a total of  468.00  from holding Synchrony Financial or generate 32.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

FirstCash  vs.  Synchrony Financial

FirstCash

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FirstCash has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Synchrony Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Synchrony Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Preferred Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with FirstCash and Synchrony Financial

The main advantage of trading using opposite FirstCash and Synchrony Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FirstCash 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.

The idea behind FirstCash and Synchrony Financial 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.