Correlation Between PayPal Holdings and LOCKHEED

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

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

Diversification Opportunities for PayPal Holdings and LOCKHEED

-0.74

Correlation Coefficient

PayPal Holdings  LOCKHEED

Pay attention - limited upside

The 3 months correlation between PayPal and LOCKHEED is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and LOCKHEED MARTIN P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOCKHEED MARTIN P 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 LOCKHEED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOCKHEED MARTIN P has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and LOCKHEED go up and down completely randomly.

Pair Corralation between PayPal Holdings and LOCKHEED

Given the investment horizon of 90 days PayPal Holdings is expected to generate 3.26 times more return on investment than LOCKHEED. However, PayPal Holdings is 3.26 times more volatile than LOCKHEED MARTIN P. It trades about 0.22 of its potential returns per unit of risk. LOCKHEED MARTIN P is currently generating about -0.17 per unit of risk. If you would invest  7,107  in PayPal Holdings on September 14, 2024 and sell it today you would earn a total of  1,995  from holding PayPal Holdings or generate 28.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	89.06%
Values	Daily Returns

PayPal Holdings  vs.  LOCKHEED MARTIN P

PayPal Holdings

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 17 (%) 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.

LOCKHEED MARTIN P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LOCKHEED MARTIN P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LOCKHEED is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PayPal Holdings and LOCKHEED

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

The idea behind PayPal Holdings and LOCKHEED MARTIN P 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..