Correlation Between PayPal Holdings and Sterling Check

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

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

Diversification Opportunities for PayPal Holdings and Sterling Check

0.78

Correlation Coefficient

PayPal Holdings  Sterling Check

Poor diversification

The 3 months correlation between PayPal and Sterling is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Sterling Check Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Check Corp 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 Sterling Check. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Check Corp has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Sterling Check go up and down completely randomly.

Pair Corralation between PayPal Holdings and Sterling Check

Given the investment horizon of 90 days PayPal Holdings is expected to generate 1.68 times more return on investment than Sterling Check. However, PayPal Holdings is 1.68 times more volatile than Sterling Check Corp. It trades about 0.1 of its potential returns per unit of risk. Sterling Check Corp is currently generating about -0.02 per unit of risk. If you would invest  7,676  in PayPal Holdings on September 20, 2024 and sell it today you would earn a total of  869.00  from holding PayPal Holdings or generate 11.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	47.62%
Values	Daily Returns

PayPal Holdings  vs.  Sterling Check Corp

PayPal Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, PayPal Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sterling Check Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sterling Check Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Sterling Check is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with PayPal Holdings and Sterling Check

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

The idea behind PayPal Holdings and Sterling Check Corp 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.