Correlation Between IONQ and PayPal Holdings

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

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

Diversification Opportunities for IONQ and PayPal Holdings

0.83

Correlation Coefficient

IONQ  PayPal Holdings

Very poor diversification

The 3 months correlation between IONQ and PayPal is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding IONQ Inc and PayPal Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PayPal Holdings and IONQ 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 IONQ 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 has no effect on the direction of IONQ i.e., IONQ and PayPal Holdings go up and down completely randomly.

Pair Corralation between IONQ and PayPal Holdings

Given the investment horizon of 90 days IONQ Inc is expected to generate 4.29 times more return on investment than PayPal Holdings. However, IONQ is 4.29 times more volatile than PayPal Holdings. It trades about 0.33 of its potential returns per unit of risk. PayPal Holdings is currently generating about 0.16 per unit of risk. If you would invest  742.00  in IONQ Inc on August 30, 2024 and sell it today you would earn a total of  2,479  from holding IONQ Inc or generate 334.1% return on investment over 90 days.

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

IONQ Inc  vs.  PayPal Holdings

IONQ Inc

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in IONQ Inc are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, IONQ reported solid returns over the last few months and may actually be approaching a breakup point.

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 IONQ and PayPal Holdings

The main advantage of trading using opposite IONQ and PayPal Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IONQ 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 IONQ Inc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.