Correlation Between Visa and PayPal Holdings
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By analyzing existing cross correlation between Visa Inc and PayPal Holdings, you can compare the effects of market volatilities on Visa and PayPal Holdings 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 Visa with a short position of PayPal Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and PayPal Holdings.
Diversification Opportunities for Visa and PayPal Holdings
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Visa and PayPal is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Visa Inc and PayPal Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PayPal Holdings and Visa 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 Visa Inc are associated (or correlated) with PayPal Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PayPal Holdings has no effect on the direction of Visa i.e., Visa and PayPal Holdings go up and down completely randomly.
Pair Corralation between Visa and PayPal Holdings
Assuming the 90 days trading horizon Visa Inc is expected to generate 0.58 times more return on investment than PayPal Holdings. However, Visa Inc is 1.72 times less risky than PayPal Holdings. It trades about 0.27 of its potential returns per unit of risk. PayPal Holdings is currently generating about 0.15 per unit of risk. If you would invest 24,829 in Visa Inc on September 24, 2024 and sell it today you would earn a total of 5,721 from holding Visa Inc or generate 23.04% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Visa Inc vs. PayPal Holdings
Performance |
Timeline |
Visa Inc |
PayPal Holdings |
Visa and PayPal Holdings Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Visa and PayPal Holdings
The main advantage of trading using opposite Visa and PayPal Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, PayPal Holdings 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 PayPal Holdings will offset losses from the drop in PayPal Holdings' long position.The idea behind Visa Inc and PayPal Holdings 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.PayPal Holdings vs. Visa Inc | PayPal Holdings vs. Visa Inc | PayPal Holdings vs. Mastercard | PayPal Holdings vs. Mastercard |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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