Correlation Between Dupont De and PayPal Holdings

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

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

Diversification Opportunities for Dupont De and PayPal Holdings

0.34

Correlation Coefficient

Dupont De  PayPal Holdings

Weak diversification

The 3 months correlation between Dupont and PayPal is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and PayPal Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PayPal Holdings and Dupont De 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 Dupont De Nemours 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 has no effect on the direction of Dupont De i.e., Dupont De and PayPal Holdings go up and down completely randomly.

Pair Corralation between Dupont De and PayPal Holdings

Allowing for the 90-day total investment horizon Dupont De is expected to generate 100.0 times less return on investment than PayPal Holdings. But when comparing it to its historical volatility, Dupont De Nemours is 1.31 times less risky than PayPal Holdings. It trades about 0.0 of its potential returns per unit of risk. PayPal Holdings is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  7,243  in PayPal Holdings on August 30, 2024 and sell it today you would earn a total of  1,414  from holding PayPal Holdings or generate 19.52% return on investment over 90 days.

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

Dupont De Nemours  vs.  PayPal Holdings

Dupont De Nemours

Risk-Adjusted Performance

0 of 100

Weak

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

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 inconsistent basic indicators, PayPal Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dupont De and PayPal Holdings

The main advantage of trading using opposite Dupont De and PayPal Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De 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 Dupont De Nemours and PayPal Holdings 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.