Correlation Between Shift4 Payments and Palo Alto

Can any of the company-specific risk be diversified away by investing in both Shift4 Payments and Palo Alto 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 Shift4 Payments and Palo Alto into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shift4 Payments and Palo Alto Networks, you can compare the effects of market volatilities on Shift4 Payments and Palo Alto 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 Shift4 Payments with a short position of Palo Alto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shift4 Payments and Palo Alto.

Diversification Opportunities for Shift4 Payments and Palo Alto

0.39

Correlation Coefficient

Shift4 Payments  Palo Alto

Weak diversification

The 3 months correlation between Shift4 and Palo is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Shift4 Payments and Palo Alto Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palo Alto Networks and Shift4 Payments 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 Shift4 Payments are associated (or correlated) with Palo Alto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palo Alto Networks has no effect on the direction of Shift4 Payments i.e., Shift4 Payments and Palo Alto go up and down completely randomly.

Pair Corralation between Shift4 Payments and Palo Alto

Given the investment horizon of 90 days Shift4 Payments is expected to under-perform the Palo Alto. In addition to that, Shift4 Payments is 1.53 times more volatile than Palo Alto Networks. It trades about -0.08 of its total potential returns per unit of risk. Palo Alto Networks is currently generating about -0.03 per unit of volatility. If you would invest  18,420  in Palo Alto Networks on December 28, 2024 and sell it today you would lose (976.00) from holding Palo Alto Networks or give up 5.3% of portfolio value over 90 days.

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

Shift4 Payments  vs.  Palo Alto Networks

Shift4 Payments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shift4 Payments has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Palo Alto Networks

Risk-Adjusted Performance

Very Weak

Over the last 90 days Palo Alto Networks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Palo Alto is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Shift4 Payments and Palo Alto

The main advantage of trading using opposite Shift4 Payments and Palo Alto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shift4 Payments position performs unexpectedly, Palo Alto 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 Palo Alto will offset losses from the drop in Palo Alto's long position.

The idea behind Shift4 Payments and Palo Alto Networks 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.