Correlation Between PayPal Holdings and ADX

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

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

Diversification Opportunities for PayPal Holdings and ADX

0.85

Correlation Coefficient

PayPal Holdings  ADX

Very poor diversification

The 3 months correlation between PayPal and ADX is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and ADX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADX 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 ADX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADX has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and ADX go up and down completely randomly.

Pair Corralation between PayPal Holdings and ADX

Given the investment horizon of 90 days PayPal Holdings is expected to generate 0.51 times more return on investment than ADX. However, PayPal Holdings is 1.95 times less risky than ADX. It trades about -0.13 of its potential returns per unit of risk. ADX is currently generating about -0.18 per unit of risk. If you would invest  8,543  in PayPal Holdings on December 28, 2024 and sell it today you would lose (1,657) from holding PayPal Holdings or give up 19.4% of portfolio value over 90 days.

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

PayPal Holdings  vs.  ADX

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 weak 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.

ADX

Risk-Adjusted Performance

Very Weak

Over the last 90 days ADX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic 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 ADX shareholders.

Pair Trading with PayPal Holdings and ADX

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

The idea behind PayPal Holdings and ADX 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.