Correlation Between PayPal Holdings and SPECTRA

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

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

Diversification Opportunities for PayPal Holdings and SPECTRA

-0.43

Correlation Coefficient

PayPal Holdings  SPECTRA

Very good diversification

The 3 months correlation between PayPal and SPECTRA is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and SPECTRA ENERGY PARTNERS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPECTRA ENERGY PARTNERS 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 SPECTRA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPECTRA ENERGY PARTNERS has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and SPECTRA go up and down completely randomly.

Pair Corralation between PayPal Holdings and SPECTRA

Given the investment horizon of 90 days PayPal Holdings is expected to generate 2.15 times more return on investment than SPECTRA. However, PayPal Holdings is 2.15 times more volatile than SPECTRA ENERGY PARTNERS. It trades about 0.1 of its potential returns per unit of risk. SPECTRA ENERGY PARTNERS is currently generating about -0.08 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 Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

PayPal Holdings  vs.  SPECTRA ENERGY PARTNERS

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.

SPECTRA ENERGY PARTNERS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with PayPal Holdings and SPECTRA

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

The idea behind PayPal Holdings and SPECTRA ENERGY PARTNERS 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.