Correlation Between PayPal Holdings and Aggressive Growth

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Can any of the company-specific risk be diversified away by investing in both PayPal Holdings and Aggressive Growth 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 Aggressive Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PayPal Holdings and Aggressive Growth Portfolio, you can compare the effects of market volatilities on PayPal Holdings and Aggressive Growth 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 Aggressive Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and Aggressive Growth.

Diversification Opportunities for PayPal Holdings and Aggressive Growth

PayPalAggressiveDiversified AwayPayPalAggressiveDiversified Away100%
0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between PayPal and Aggressive is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Aggressive Growth Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Growth 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 Aggressive Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Growth has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Aggressive Growth go up and down completely randomly.

Pair Corralation between PayPal Holdings and Aggressive Growth

Given the investment horizon of 90 days PayPal Holdings is expected to generate 1.55 times more return on investment than Aggressive Growth. However, PayPal Holdings is 1.55 times more volatile than Aggressive Growth Portfolio. It trades about 0.23 of its potential returns per unit of risk. Aggressive Growth Portfolio is currently generating about 0.11 per unit of risk. If you would invest  7,010  in PayPal Holdings on September 13, 2024 and sell it today you would earn a total of  2,065  from holding PayPal Holdings or generate 29.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

PayPal Holdings  vs.  Aggressive Growth Portfolio

 Performance 
JavaScript chart by amCharts 3.21.15OctNov 51015202530
JavaScript chart by amCharts 3.21.15PYPL PAGHX
       Timeline  
PayPal Holdings 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, PayPal Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec75808590
Aggressive Growth 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Aggressive Growth Portfolio are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, Aggressive Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec9092949698100102

PayPal Holdings and Aggressive Growth Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.46-4.09-2.72-1.350.02281.523.074.616.16 0.050.100.150.200.25
JavaScript chart by amCharts 3.21.15PYPL PAGHX
       Returns  

Pair Trading with PayPal Holdings and Aggressive Growth

The main advantage of trading using opposite PayPal Holdings and Aggressive Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, Aggressive Growth 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 Aggressive Growth will offset losses from the drop in Aggressive Growth's long position.
The idea behind PayPal Holdings and Aggressive Growth Portfolio 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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