Correlation Between Marfrig Global and PayPal Holdings

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

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

Diversification Opportunities for Marfrig Global and PayPal Holdings

0.88

Correlation Coefficient

Marfrig Global  PayPal Holdings

Very poor diversification

The 3 months correlation between Marfrig and PayPal is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Marfrig Global Foods and PayPal Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PayPal Holdings and Marfrig Global 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 Marfrig Global Foods 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 Marfrig Global i.e., Marfrig Global and PayPal Holdings go up and down completely randomly.

Pair Corralation between Marfrig Global and PayPal Holdings

Assuming the 90 days trading horizon Marfrig Global Foods is expected to under-perform the PayPal Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Marfrig Global Foods is 1.12 times less risky than PayPal Holdings. The stock trades about -0.17 of its potential returns per unit of risk. The PayPal Holdings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,683  in PayPal Holdings on October 23, 2024 and sell it today you would earn a total of  97.00  from holding PayPal Holdings or generate 3.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.44%
Values	Daily Returns

Marfrig Global Foods  vs.  PayPal Holdings

Marfrig Global Foods

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Marfrig Global Foods are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Marfrig Global unveiled solid returns over the last few months and may actually be approaching a breakup point.

PayPal Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, PayPal Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Marfrig Global and PayPal Holdings

The main advantage of trading using opposite Marfrig Global and PayPal Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marfrig Global 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 Marfrig Global Foods 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.