Correlation Between PayPal Holdings and Sun Hung

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

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

Diversification Opportunities for PayPal Holdings and Sun Hung

0.35

Correlation Coefficient

PayPal Holdings  Sun Hung

Weak diversification

The 3 months correlation between PayPal and Sun is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Sun Hung Kai in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Hung Kai 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 Sun Hung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Hung Kai has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Sun Hung go up and down completely randomly.

Pair Corralation between PayPal Holdings and Sun Hung

Given the investment horizon of 90 days PayPal Holdings is expected to generate 0.94 times more return on investment than Sun Hung. However, PayPal Holdings is 1.07 times less risky than Sun Hung. It trades about 0.27 of its potential returns per unit of risk. Sun Hung Kai is currently generating about -0.12 per unit of risk. If you would invest  7,813  in PayPal Holdings on September 4, 2024 and sell it today you would earn a total of  701.00  from holding PayPal Holdings or generate 8.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

PayPal Holdings  vs.  Sun Hung Kai

PayPal Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 11 (%) 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.

Sun Hung Kai

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Hung Kai are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking indicators, Sun Hung may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PayPal Holdings and Sun Hung

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

The idea behind PayPal Holdings and Sun Hung Kai 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..