Correlation Between Clarke and PayPal Holdings

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

By analyzing existing cross correlation between Clarke Inc and PayPal Holdings CDR, you can compare the effects of market volatilities on Clarke and PayPal Holdings 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 Clarke with a short position of PayPal Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clarke and PayPal Holdings.

Diversification Opportunities for Clarke and PayPal Holdings

-0.76

Correlation Coefficient

Clarke  PayPal Holdings

Pay attention - limited upside

The 3 months correlation between Clarke and PayPal is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Clarke Inc and PayPal Holdings CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PayPal Holdings CDR and Clarke 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 Clarke Inc are associated (or correlated) with PayPal Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PayPal Holdings CDR has no effect on the direction of Clarke i.e., Clarke and PayPal Holdings go up and down completely randomly.

Pair Corralation between Clarke and PayPal Holdings

Assuming the 90 days trading horizon Clarke Inc is expected to generate 0.79 times more return on investment than PayPal Holdings. However, Clarke Inc is 1.26 times less risky than PayPal Holdings. It trades about 0.09 of its potential returns per unit of risk. PayPal Holdings CDR is currently generating about 0.02 per unit of risk. If you would invest  1,201  in Clarke Inc on September 23, 2024 and sell it today you would earn a total of  1,159  from holding Clarke Inc or generate 96.5% return on investment over 90 days.

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

Clarke Inc  vs.  PayPal Holdings CDR

Clarke Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clarke Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Clarke is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

PayPal Holdings CDR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings CDR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, PayPal Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Clarke and PayPal Holdings

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

The idea behind Clarke Inc and PayPal Holdings CDR 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.