Correlation Between PayPal Holdings and Top Glove

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

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

Diversification Opportunities for PayPal Holdings and Top Glove

0.82

Correlation Coefficient

PayPal Holdings  Top Glove

Very poor diversification

The 3 months correlation between PayPal and Top is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Top Glove in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Top Glove 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 Top Glove. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Top Glove has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Top Glove go up and down completely randomly.

Pair Corralation between PayPal Holdings and Top Glove

Given the investment horizon of 90 days PayPal Holdings is expected to generate 0.71 times more return on investment than Top Glove. However, PayPal Holdings is 1.42 times less risky than Top Glove. It trades about 0.35 of its potential returns per unit of risk. Top Glove is currently generating about 0.18 per unit of risk. If you would invest  7,813  in PayPal Holdings on September 3, 2024 and sell it today you would earn a total of  864.00  from holding PayPal Holdings or generate 11.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

PayPal Holdings  vs.  Top Glove

PayPal Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, PayPal Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Top Glove

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Top Glove are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Top Glove disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PayPal Holdings and Top Glove

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

The idea behind PayPal Holdings and Top Glove 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.