Correlation Between PayPal Holdings and Sands Capital

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

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

Diversification Opportunities for PayPal Holdings and Sands Capital

0.9

Correlation Coefficient

PayPal Holdings  Sands Capital

Almost no diversification

The 3 months correlation between PayPal and Sands is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Sands Capital Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sands Capital Global 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 Sands Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sands Capital Global has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Sands Capital go up and down completely randomly.

Pair Corralation between PayPal Holdings and Sands Capital

Given the investment horizon of 90 days PayPal Holdings is expected to generate 1.33 times less return on investment than Sands Capital. In addition to that, PayPal Holdings is 1.84 times more volatile than Sands Capital Global. It trades about 0.03 of its total potential returns per unit of risk. Sands Capital Global is currently generating about 0.08 per unit of volatility. If you would invest  2,138  in Sands Capital Global on September 12, 2024 and sell it today you would earn a total of  1,280  from holding Sands Capital Global or generate 59.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

PayPal Holdings  vs.  Sands Capital Global

PayPal Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 16 (%) 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.

Sands Capital Global

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sands Capital Global are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Sands Capital showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PayPal Holdings and Sands Capital

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

The idea behind PayPal Holdings and Sands Capital Global 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.