Correlation Between PayPal Holdings and First American

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

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

Diversification Opportunities for PayPal Holdings and First American

0.0

Correlation Coefficient

PayPal Holdings  First American

Pay attention - limited upside

The 3 months correlation between PayPal and First is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and First American Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First American Silver 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 First American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First American Silver has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and First American go up and down completely randomly.

Pair Corralation between PayPal Holdings and First American

Given the investment horizon of 90 days PayPal Holdings is expected to generate 66.77 times less return on investment than First American. But when comparing it to its historical volatility, PayPal Holdings is 19.91 times less risky than First American. It trades about 0.01 of its potential returns per unit of risk. First American Silver is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  0.26  in First American Silver on December 2, 2024 and sell it today you would lose (0.25) from holding First American Silver or give up 96.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.0%
Values	Daily Returns

PayPal Holdings  vs.  First American Silver

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.

First American Silver

Risk-Adjusted Performance

Very Weak

Over the last 90 days First American Silver has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, First American is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PayPal Holdings and First American

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

The idea behind PayPal Holdings and First American Silver 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.