Correlation Between PayPal Holdings and Thrivent Small

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

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

Diversification Opportunities for PayPal Holdings and Thrivent Small

0.89

Correlation Coefficient

PayPal Holdings  Thrivent Small

Very poor diversification

The 3 months correlation between PayPal and Thrivent is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Thrivent Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thrivent Small Cap 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 Thrivent Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thrivent Small Cap has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Thrivent Small go up and down completely randomly.

Pair Corralation between PayPal Holdings and Thrivent Small

Given the investment horizon of 90 days PayPal Holdings is expected to generate 1.74 times more return on investment than Thrivent Small. However, PayPal Holdings is 1.74 times more volatile than Thrivent Small Cap. It trades about 0.17 of its potential returns per unit of risk. Thrivent Small Cap is currently generating about 0.16 per unit of risk. If you would invest  7,200  in PayPal Holdings on September 3, 2024 and sell it today you would earn a total of  1,477  from holding PayPal Holdings or generate 20.51% return on investment over 90 days.

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

PayPal Holdings  vs.  Thrivent Small Cap

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.

Thrivent Small Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Thrivent Small Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Thrivent Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PayPal Holdings and Thrivent Small

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

The idea behind PayPal Holdings and Thrivent Small Cap 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.