Correlation Between Synchrony Financial and Green Dot

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

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

Diversification Opportunities for Synchrony Financial and Green Dot

0.45

Correlation Coefficient

Synchrony Financial  Green Dot

Very weak diversification

The 3 months correlation between Synchrony and Green is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and Green Dot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Dot 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 Green Dot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Dot has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and Green Dot go up and down completely randomly.

Pair Corralation between Synchrony Financial and Green Dot

Assuming the 90 days trading horizon Synchrony Financial is expected to under-perform the Green Dot. But the preferred stock apears to be less risky and, when comparing its historical volatility, Synchrony Financial is 1.61 times less risky than Green Dot. The preferred stock trades about -0.15 of its potential returns per unit of risk. The Green Dot is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,066  in Green Dot on September 19, 2024 and sell it today you would earn a total of  61.00  from holding Green Dot or generate 5.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Synchrony Financial  vs.  Green Dot

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.

Green Dot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Green Dot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Synchrony Financial and Green Dot

The main advantage of trading using opposite Synchrony Financial and Green Dot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Synchrony Financial position performs unexpectedly, Green Dot 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 Green Dot will offset losses from the drop in Green Dot's long position.

The idea behind Synchrony Financial and Green Dot 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.