Correlation Between PayPal Holdings and American Funds

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

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

Diversification Opportunities for PayPal Holdings and American Funds

-0.7

Correlation Coefficient

PayPal Holdings  American Funds

Excellent diversification

The 3 months correlation between PayPal and American is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and American Funds Developing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Developing 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Developing has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and American Funds go up and down completely randomly.

Pair Corralation between PayPal Holdings and American Funds

Given the investment horizon of 90 days PayPal Holdings is expected to under-perform the American Funds. In addition to that, PayPal Holdings is 2.91 times more volatile than American Funds Developing. It trades about -0.13 of its total potential returns per unit of risk. American Funds Developing is currently generating about 0.09 per unit of volatility. If you would invest  1,062  in American Funds Developing on December 29, 2024 and sell it today you would earn a total of  51.00  from holding American Funds Developing or generate 4.8% return on investment over 90 days.

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

PayPal Holdings  vs.  American Funds Developing

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.

American Funds Developing

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds Developing are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, American Funds 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 American Funds

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

The idea behind PayPal Holdings and American Funds Developing 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.