Correlation Between PayPal Holdings and Vertical Exploration

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

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

Diversification Opportunities for PayPal Holdings and Vertical Exploration

-0.61

Correlation Coefficient

PayPal Holdings  Vertical Exploration

Excellent diversification

The 3 months correlation between PayPal and Vertical is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Vertical Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vertical Exploration 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 Vertical Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vertical Exploration has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Vertical Exploration go up and down completely randomly.

Pair Corralation between PayPal Holdings and Vertical Exploration

Given the investment horizon of 90 days PayPal Holdings is expected to under-perform the Vertical Exploration. In addition to that, PayPal Holdings is 24.44 times more volatile than Vertical Exploration. It trades about -0.13 of its total potential returns per unit of risk. Vertical Exploration is currently generating about 0.13 per unit of volatility. If you would invest  2.43  in Vertical Exploration on December 29, 2024 and sell it today you would earn a total of  0.02  from holding Vertical Exploration or generate 0.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.31%
Values	Daily Returns

PayPal Holdings  vs.  Vertical Exploration

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.

Vertical Exploration

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vertical Exploration are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Vertical Exploration is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PayPal Holdings and Vertical Exploration

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

The idea behind PayPal Holdings and Vertical Exploration 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.