Correlation Between PayPal Holdings and Solution Financial

Can any of the company-specific risk be diversified away by investing in both PayPal Holdings and Solution Financial 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 Solution Financial 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 Solution Financial, you can compare the effects of market volatilities on PayPal Holdings and Solution Financial 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 Solution Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and Solution Financial.

Diversification Opportunities for PayPal Holdings and Solution Financial

0.06

Correlation Coefficient

PayPal Holdings  Solution Financial

Significant diversification

The 3 months correlation between PayPal and Solution is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings CDR and Solution Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solution Financial 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 Solution Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solution Financial has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Solution Financial go up and down completely randomly.

Pair Corralation between PayPal Holdings and Solution Financial

Assuming the 90 days trading horizon PayPal Holdings CDR is expected to under-perform the Solution Financial. In addition to that, PayPal Holdings is 1.05 times more volatile than Solution Financial. It trades about -0.13 of its total potential returns per unit of risk. Solution Financial is currently generating about 0.04 per unit of volatility. If you would invest  28.00  in Solution Financial on December 23, 2024 and sell it today you would earn a total of  1.00  from holding Solution Financial or generate 3.57% return on investment over 90 days.

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

PayPal Holdings CDR  vs.  Solution Financial

PayPal Holdings CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days PayPal Holdings CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Solution Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Solution Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Solution Financial is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PayPal Holdings and Solution Financial

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

The idea behind PayPal Holdings CDR and Solution Financial 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.