Correlation Between PayPal Holdings and AVE SA

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

By analyzing existing cross correlation between PayPal Holdings and AVE SA, you can compare the effects of market volatilities on PayPal Holdings and AVE SA 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 AVE SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and AVE SA.

Diversification Opportunities for PayPal Holdings and AVE SA

-0.18

Correlation Coefficient

PayPal Holdings  AVE SA

Good diversification

The 3 months correlation between PayPal and AVE is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and AVE SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVE SA 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 AVE SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVE SA has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and AVE SA go up and down completely randomly.

Pair Corralation between PayPal Holdings and AVE SA

Given the investment horizon of 90 days PayPal Holdings is expected to generate 0.86 times more return on investment than AVE SA. However, PayPal Holdings is 1.17 times less risky than AVE SA. It trades about 0.22 of its potential returns per unit of risk. AVE SA is currently generating about 0.03 per unit of risk. If you would invest  7,036  in PayPal Holdings on September 12, 2024 and sell it today you would earn a total of  2,037  from holding PayPal Holdings or generate 28.95% return on investment over 90 days.

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

PayPal Holdings  vs.  AVE SA

PayPal Holdings

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 17 (%) 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.

AVE SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AVE SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, AVE SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with PayPal Holdings and AVE SA

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

The idea behind PayPal Holdings and AVE SA 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.