Correlation Between Palo Alto and Paysafe

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

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

Diversification Opportunities for Palo Alto and Paysafe

-0.47

Correlation Coefficient

Palo Alto  Paysafe

Very good diversification

The 3 months correlation between Palo and Paysafe is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Palo Alto Networks and Paysafe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paysafe and Palo Alto 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 Palo Alto Networks are associated (or correlated) with Paysafe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paysafe has no effect on the direction of Palo Alto i.e., Palo Alto and Paysafe go up and down completely randomly.

Pair Corralation between Palo Alto and Paysafe

Given the investment horizon of 90 days Palo Alto Networks is expected to generate 0.98 times more return on investment than Paysafe. However, Palo Alto Networks is 1.02 times less risky than Paysafe. It trades about -0.04 of its potential returns per unit of risk. Paysafe is currently generating about -0.09 per unit of risk. If you would invest  19,319  in Palo Alto Networks on September 26, 2024 and sell it today you would lose (497.00) from holding Palo Alto Networks or give up 2.57% of portfolio value over 90 days.

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

Palo Alto Networks  vs.  Paysafe

Palo Alto Networks

Risk-Adjusted Performance

7 of 100

OK

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

Paysafe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paysafe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Palo Alto and Paysafe

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

The idea behind Palo Alto Networks and Paysafe 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.