Correlation Between PayPal Holdings and U Media

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

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

Diversification Opportunities for PayPal Holdings and U Media

0.13

Correlation Coefficient

PayPal Holdings  U Media

Average diversification

The 3 months correlation between PayPal and 6470 is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and U Media Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on U Media Communications and PayPal Holdings 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 PayPal Holdings are associated (or correlated) with U Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of U Media Communications has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and U Media go up and down completely randomly.

Pair Corralation between PayPal Holdings and U Media

Given the investment horizon of 90 days PayPal Holdings is expected to generate 1.0 times more return on investment than U Media. However, PayPal Holdings is 1.0 times less risky than U Media. It trades about 0.17 of its potential returns per unit of risk. U Media Communications is currently generating about 0.02 per unit of risk. If you would invest  7,200  in PayPal Holdings on September 3, 2024 and sell it today you would earn a total of  1,477  from holding PayPal Holdings or generate 20.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

PayPal Holdings  vs.  U Media Communications

PayPal Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, PayPal Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

U Media Communications

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in U Media Communications are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, U Media is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with PayPal Holdings and U Media

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

The idea behind PayPal Holdings and U Media Communications 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.