Correlation Between PayPal Holdings and Phoenix Materials

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

By analyzing existing cross correlation between PayPal Holdings and Phoenix Materials Co, you can compare the effects of market volatilities on PayPal Holdings and Phoenix Materials 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 Phoenix Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and Phoenix Materials.

Diversification Opportunities for PayPal Holdings and Phoenix Materials

0.19

Correlation Coefficient

PayPal Holdings  Phoenix Materials

Average diversification

The 3 months correlation between PayPal and Phoenix is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Phoenix Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phoenix Materials 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 are associated (or correlated) with Phoenix Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phoenix Materials has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Phoenix Materials go up and down completely randomly.

Pair Corralation between PayPal Holdings and Phoenix Materials

Given the investment horizon of 90 days PayPal Holdings is expected to under-perform the Phoenix Materials. But the stock apears to be less risky and, when comparing its historical volatility, PayPal Holdings is 2.0 times less risky than Phoenix Materials. The stock trades about -0.16 of its potential returns per unit of risk. The Phoenix Materials Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  71,400  in Phoenix Materials Co on December 2, 2024 and sell it today you would lose (3,600) from holding Phoenix Materials Co or give up 5.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.5%
Values	Daily Returns

PayPal Holdings  vs.  Phoenix Materials Co

PayPal Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days PayPal Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Phoenix Materials

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Phoenix Materials Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Phoenix Materials may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with PayPal Holdings and Phoenix Materials

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

The idea behind PayPal Holdings and Phoenix Materials Co 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.