Correlation Between Margo Caribe and PayPal Holdings

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

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

Diversification Opportunities for Margo Caribe and PayPal Holdings

-0.68

Correlation Coefficient

Margo Caribe  PayPal Holdings

Excellent diversification

The 3 months correlation between Margo and PayPal is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Margo Caribe and PayPal Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PayPal Holdings and Margo Caribe 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 Margo Caribe 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 Margo Caribe i.e., Margo Caribe and PayPal Holdings go up and down completely randomly.

Pair Corralation between Margo Caribe and PayPal Holdings

Given the investment horizon of 90 days Margo Caribe is expected to generate 40.13 times more return on investment than PayPal Holdings. However, Margo Caribe is 40.13 times more volatile than PayPal Holdings. It trades about 0.13 of its potential returns per unit of risk. PayPal Holdings is currently generating about 0.08 per unit of risk. If you would invest  800.00  in Margo Caribe on September 20, 2024 and sell it today you would lose (335.00) from holding Margo Caribe or give up 41.87% of portfolio value over 90 days.

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

Margo Caribe  vs.  PayPal Holdings

Margo Caribe

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Margo Caribe are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Margo Caribe displayed solid returns over the last few months and may actually be approaching a breakup point.

PayPal Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 8 (%) 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 Margo Caribe and PayPal Holdings

The main advantage of trading using opposite Margo Caribe and PayPal Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Margo Caribe 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 Margo Caribe 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.