Correlation Between PayPal Holdings and FinVolution

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

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

Diversification Opportunities for PayPal Holdings and FinVolution

0.69

Correlation Coefficient

PayPal Holdings  FinVolution

Poor diversification

The 3 months correlation between PayPal and FinVolution is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and FinVolution Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FinVolution Group 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 FinVolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FinVolution Group has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and FinVolution go up and down completely randomly.

Pair Corralation between PayPal Holdings and FinVolution

Given the investment horizon of 90 days PayPal Holdings is expected to generate 1.04 times less return on investment than FinVolution. But when comparing it to its historical volatility, PayPal Holdings is 1.45 times less risky than FinVolution. It trades about 0.21 of its potential returns per unit of risk. FinVolution Group is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  538.00  in FinVolution Group on September 17, 2024 and sell it today you would earn a total of  142.00  from holding FinVolution Group or generate 26.39% 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.  FinVolution Group

PayPal Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, PayPal Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

FinVolution Group

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with PayPal Holdings and FinVolution

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

The idea behind PayPal Holdings and FinVolution Group 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.