Correlation Between China Lending and Synchrony Financial

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

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

Diversification Opportunities for China Lending and Synchrony Financial

-0.5

Correlation Coefficient

China Lending  Synchrony Financial

Very good diversification

The 3 months correlation between China and Synchrony is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding China Lending Corp and Synchrony Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synchrony Financial and China Lending 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 China Lending 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 China Lending i.e., China Lending and Synchrony Financial go up and down completely randomly.

Pair Corralation between China Lending and Synchrony Financial

If you would invest  2,529  in Synchrony Financial on September 1, 2024 and sell it today you would earn a total of  121.00  from holding Synchrony Financial or generate 4.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.59%
Values	Daily Returns

China Lending Corp  vs.  Synchrony Financial

China Lending Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Lending Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, China Lending is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Synchrony Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Synchrony Financial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Synchrony Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Lending and Synchrony Financial

The main advantage of trading using opposite China Lending and Synchrony Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Lending 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 China Lending Corp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.