Correlation Between PayPal Holdings and Vanguard Russell

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

By analyzing existing cross correlation between PayPal Holdings and Vanguard Russell 2000, you can compare the effects of market volatilities on PayPal Holdings and Vanguard Russell 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 Vanguard Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and Vanguard Russell.

Diversification Opportunities for PayPal Holdings and Vanguard Russell

0.88

Correlation Coefficient

PayPal Holdings  Vanguard Russell

Very poor diversification

The 3 months correlation between PayPal and Vanguard is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Vanguard Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Russell 2000 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 Vanguard Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Russell 2000 has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Vanguard Russell go up and down completely randomly.

Pair Corralation between PayPal Holdings and Vanguard Russell

Given the investment horizon of 90 days PayPal Holdings is expected to generate 1.44 times more return on investment than Vanguard Russell. However, PayPal Holdings is 1.44 times more volatile than Vanguard Russell 2000. It trades about 0.16 of its potential returns per unit of risk. Vanguard Russell 2000 is currently generating about 0.19 per unit of risk. If you would invest  7,261  in PayPal Holdings on September 4, 2024 and sell it today you would earn a total of  1,392  from holding PayPal Holdings or generate 19.17% return on investment over 90 days.

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

PayPal Holdings  vs.  Vanguard Russell 2000

PayPal Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 12 (%) 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.

Vanguard Russell 2000

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Russell 2000 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Vanguard Russell reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PayPal Holdings and Vanguard Russell

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

The idea behind PayPal Holdings and Vanguard Russell 2000 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.