Correlation Between Synchrony Financial and FinVolution

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

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

Diversification Opportunities for Synchrony Financial and FinVolution

0.01

Correlation Coefficient

Synchrony Financial  FinVolution

Significant diversification

The 3 months correlation between Synchrony and FinVolution is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and FinVolution Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FinVolution Group 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 FinVolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FinVolution Group has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and FinVolution go up and down completely randomly.

Pair Corralation between Synchrony Financial and FinVolution

Assuming the 90 days trading horizon Synchrony Financial is expected to generate 4.49 times less return on investment than FinVolution. But when comparing it to its historical volatility, Synchrony Financial is 3.75 times less risky than FinVolution. It trades about 0.05 of its potential returns per unit of risk. FinVolution Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  617.00  in FinVolution Group on October 12, 2024 and sell it today you would earn a total of  48.00  from holding FinVolution Group or generate 7.78% return on investment over 90 days.

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

Synchrony Financial  vs.  FinVolution Group

Synchrony Financial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Synchrony Financial are ranked lower than 4 (%) 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.

FinVolution Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FinVolution Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, FinVolution may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Synchrony Financial and FinVolution

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

The idea behind Synchrony Financial and FinVolution Group 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.