Correlation Between Synchrony Financial and Sezzle

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

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

Diversification Opportunities for Synchrony Financial and Sezzle

0.76

Correlation Coefficient

Synchrony Financial  Sezzle

Poor diversification

The 3 months correlation between Synchrony and Sezzle is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Synchrony Financial and Sezzle Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sezzle Inc 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 Sezzle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sezzle Inc has no effect on the direction of Synchrony Financial i.e., Synchrony Financial and Sezzle go up and down completely randomly.

Pair Corralation between Synchrony Financial and Sezzle

Considering the 90-day investment horizon Synchrony Financial is expected to generate 139.7 times less return on investment than Sezzle. But when comparing it to its historical volatility, Synchrony Financial is 80.41 times less risky than Sezzle. It trades about 0.11 of its potential returns per unit of risk. Sezzle Inc is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  35.00  in Sezzle Inc on September 14, 2024 and sell it today you would earn a total of  699.00  from holding Sezzle Inc or generate 1997.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	10.94%
Values	Daily Returns

Synchrony Financial  vs.  Sezzle Inc

Synchrony Financial

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Synchrony Financial are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Synchrony Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Sezzle Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sezzle Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Sezzle is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Synchrony Financial and Sezzle

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

The idea behind Synchrony Financial and Sezzle Inc 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.