Correlation Between PayPal Holdings and Riskified

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

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

Diversification Opportunities for PayPal Holdings and Riskified

-0.47

Correlation Coefficient

PayPal Holdings  Riskified

Very good diversification

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

Pair Corralation between PayPal Holdings and Riskified

Given the investment horizon of 90 days PayPal Holdings is expected to generate 0.89 times more return on investment than Riskified. However, PayPal Holdings is 1.12 times less risky than Riskified. It trades about 0.17 of its potential returns per unit of risk. Riskified is currently generating about -0.01 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 Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

PayPal Holdings  vs.  Riskified

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.

Riskified

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Riskified has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking signals, Riskified is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PayPal Holdings and Riskified

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

The idea behind PayPal Holdings and Riskified 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.