Correlation Between PayPal Holdings and Consumer Portfolio
Can any of the company-specific risk be diversified away by investing in both PayPal Holdings and Consumer Portfolio 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 Consumer Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PayPal Holdings and Consumer Portfolio Services, you can compare the effects of market volatilities on PayPal Holdings and Consumer Portfolio 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 Consumer Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and Consumer Portfolio.
Diversification Opportunities for PayPal Holdings and Consumer Portfolio
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PayPal and Consumer is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Consumer Portfolio Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Portfolio 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 Consumer Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Portfolio has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Consumer Portfolio go up and down completely randomly.
Pair Corralation between PayPal Holdings and Consumer Portfolio
Given the investment horizon of 90 days PayPal Holdings is expected to generate 1.32 times less return on investment than Consumer Portfolio. But when comparing it to its historical volatility, PayPal Holdings is 1.5 times less risky than Consumer Portfolio. It trades about 0.04 of its potential returns per unit of risk. Consumer Portfolio Services is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 853.00 in Consumer Portfolio Services on September 13, 2024 and sell it today you would earn a total of 241.00 from holding Consumer Portfolio Services or generate 28.25% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
PayPal Holdings vs. Consumer Portfolio Services
Performance |
Timeline |
PayPal Holdings |
Consumer Portfolio |
PayPal Holdings and Consumer Portfolio Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with PayPal Holdings and Consumer Portfolio
The main advantage of trading using opposite PayPal Holdings and Consumer Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, Consumer Portfolio 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 Consumer Portfolio will offset losses from the drop in Consumer Portfolio's long position.PayPal Holdings vs. SoFi Technologies | PayPal Holdings vs. Visa Class A | PayPal Holdings vs. Mastercard | PayPal Holdings vs. Capital One Financial |
Consumer Portfolio vs. Visa Class A | Consumer Portfolio vs. PayPal Holdings | Consumer Portfolio vs. Upstart Holdings | Consumer Portfolio vs. Mastercard |
Check out your portfolio center.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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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