Correlation Between PayPal Holdings and Spectral Med

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

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

Diversification Opportunities for PayPal Holdings and Spectral Med

-0.75

Correlation Coefficient

PayPal Holdings  Spectral Med

Pay attention - limited upside

The 3 months correlation between PayPal and Spectral is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings CDR and Spectral Med in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectral Med and PayPal Holdings 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 PayPal Holdings CDR are associated (or correlated) with Spectral Med. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectral Med has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Spectral Med go up and down completely randomly.

Pair Corralation between PayPal Holdings and Spectral Med

Assuming the 90 days trading horizon PayPal Holdings CDR is expected to under-perform the Spectral Med. But the stock apears to be less risky and, when comparing its historical volatility, PayPal Holdings CDR is 1.56 times less risky than Spectral Med. The stock trades about -0.06 of its potential returns per unit of risk. The Spectral Med is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  53.00  in Spectral Med on October 9, 2024 and sell it today you would earn a total of  4.00  from holding Spectral Med or generate 7.55% return on investment over 90 days.

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

PayPal Holdings CDR  vs.  Spectral Med

PayPal Holdings CDR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings CDR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, PayPal Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Spectral Med

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spectral Med has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Spectral Med is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PayPal Holdings and Spectral Med

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

The idea behind PayPal Holdings CDR and Spectral Med 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.

Check out your portfolio center.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.