Correlation Between Adaro Energy and PayPal Holdings

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

By analyzing existing cross correlation between Adaro Energy Tbk and PayPal Holdings, you can compare the effects of market volatilities on Adaro Energy 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 Adaro Energy with a short position of PayPal Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adaro Energy and PayPal Holdings.

Diversification Opportunities for Adaro Energy and PayPal Holdings

-0.6

Correlation Coefficient

Adaro Energy  PayPal Holdings

Excellent diversification

The 3 months correlation between Adaro and PayPal is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Adaro Energy Tbk and PayPal Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PayPal Holdings and Adaro Energy 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 Adaro Energy Tbk 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 Adaro Energy i.e., Adaro Energy and PayPal Holdings go up and down completely randomly.

Pair Corralation between Adaro Energy and PayPal Holdings

Assuming the 90 days horizon Adaro Energy Tbk is expected to under-perform the PayPal Holdings. In addition to that, Adaro Energy is 2.62 times more volatile than PayPal Holdings. It trades about -0.01 of its total potential returns per unit of risk. PayPal Holdings is currently generating about 0.09 per unit of volatility. If you would invest  7,757  in PayPal Holdings on September 19, 2024 and sell it today you would earn a total of  788.00  from holding PayPal Holdings or generate 10.16% return on investment over 90 days.

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

Adaro Energy Tbk  vs.  PayPal Holdings

Adaro Energy Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adaro Energy Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Adaro Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

PayPal Holdings

Risk-Adjusted Performance

7 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, PayPal Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Adaro Energy and PayPal Holdings

The main advantage of trading using opposite Adaro Energy and PayPal Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adaro Energy 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 Adaro Energy Tbk 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.