Correlation Between PayPal Holdings and Fentura Financial

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

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

Diversification Opportunities for PayPal Holdings and Fentura Financial

0.85

Correlation Coefficient

PayPal Holdings  Fentura Financial

Very poor diversification

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

Pair Corralation between PayPal Holdings and Fentura Financial

Given the investment horizon of 90 days PayPal Holdings is expected to generate 1.38 times more return on investment than Fentura Financial. However, PayPal Holdings is 1.38 times more volatile than Fentura Financial. It trades about -0.07 of its potential returns per unit of risk. Fentura Financial is currently generating about -0.21 per unit of risk. If you would invest  9,000  in PayPal Holdings on October 8, 2024 and sell it today you would lose (240.00) from holding PayPal Holdings or give up 2.67% of portfolio value over 90 days.

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

PayPal Holdings  vs.  Fentura Financial

PayPal Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, PayPal Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Fentura Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fentura Financial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Fentura Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PayPal Holdings and Fentura Financial

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

The idea behind PayPal Holdings and Fentura Financial 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.