Correlation Between PayPal Holdings and V

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

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

Diversification Opportunities for PayPal Holdings and V

0.0

Correlation Coefficient

PayPal Holdings  V

Pay attention - limited upside

The 3 months correlation between PayPal and V is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and V Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on V Group 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 V. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of V Group has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and V go up and down completely randomly.

Pair Corralation between PayPal Holdings and V

Given the investment horizon of 90 days PayPal Holdings is expected to generate 28.88 times less return on investment than V. But when comparing it to its historical volatility, PayPal Holdings is 11.01 times less risky than V. It trades about 0.03 of its potential returns per unit of risk. V Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.03  in V Group on September 12, 2024 and sell it today you would lose (0.02) from holding V Group or give up 66.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

PayPal Holdings  vs.  V Group

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.

V Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days V Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, V is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PayPal Holdings and V

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

The idea behind PayPal Holdings and V Group 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.