Correlation Between PayPal Holdings and True North

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

Diversification Opportunities for PayPal Holdings and True North

-0.75

Correlation Coefficient

PayPal Holdings  True North

Pay attention - limited upside

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

Pair Corralation between PayPal Holdings and True North

Assuming the 90 days trading horizon PayPal Holdings CDR is expected to generate 0.59 times more return on investment than True North. However, PayPal Holdings CDR is 1.7 times less risky than True North. It trades about 0.02 of its potential returns per unit of risk. True North Commercial is currently generating about -0.04 per unit of risk. If you would invest  591.00  in PayPal Holdings CDR on October 10, 2024 and sell it today you would earn a total of  62.00  from holding PayPal Holdings CDR or generate 10.49% 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.  True North Commercial

PayPal Holdings CDR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings CDR are ranked lower than 7 (%) 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.

True North Commercial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days True North Commercial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with PayPal Holdings and True North

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

The idea behind PayPal Holdings CDR and True North Commercial 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.