Correlation Between EZCORP and Synchrony Financial

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

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

Diversification Opportunities for EZCORP and Synchrony Financial

0.54

Correlation Coefficient

EZCORP  Synchrony Financial

Very weak diversification

The 3 months correlation between EZCORP and Synchrony is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding EZCORP Inc and Synchrony Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synchrony Financial and EZCORP 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 EZCORP Inc 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 EZCORP i.e., EZCORP and Synchrony Financial go up and down completely randomly.

Pair Corralation between EZCORP and Synchrony Financial

Given the investment horizon of 90 days EZCORP Inc is expected to generate 3.01 times more return on investment than Synchrony Financial. However, EZCORP is 3.01 times more volatile than Synchrony Financial. It trades about 0.07 of its potential returns per unit of risk. Synchrony Financial is currently generating about 0.13 per unit of risk. If you would invest  1,191  in EZCORP Inc on August 31, 2024 and sell it today you would earn a total of  74.00  from holding EZCORP Inc or generate 6.21% return on investment over 90 days.

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

EZCORP Inc  vs.  Synchrony Financial

EZCORP Inc

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EZCORP Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, EZCORP may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Synchrony Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Synchrony Financial are ranked lower than 9 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with EZCORP and Synchrony Financial

The main advantage of trading using opposite EZCORP and Synchrony Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EZCORP 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 EZCORP Inc 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 Managers module to screen money managers from public funds and ETFs managed around the world.