Correlation Between PayPal Holdings and Frontier Lithium

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

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

Diversification Opportunities for PayPal Holdings and Frontier Lithium

-0.88

Correlation Coefficient

PayPal Holdings  Frontier Lithium

Pay attention - limited upside

The 3 months correlation between PayPal and Frontier is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Frontier Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Lithium 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 Frontier Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Lithium has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Frontier Lithium go up and down completely randomly.

Pair Corralation between PayPal Holdings and Frontier Lithium

Given the investment horizon of 90 days PayPal Holdings is expected to generate 0.4 times more return on investment than Frontier Lithium. However, PayPal Holdings is 2.52 times less risky than Frontier Lithium. It trades about 0.08 of its potential returns per unit of risk. Frontier Lithium is currently generating about 0.0 per unit of risk. If you would invest  5,904  in PayPal Holdings on September 4, 2024 and sell it today you would earn a total of  2,749  from holding PayPal Holdings or generate 46.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

PayPal Holdings  vs.  Frontier Lithium

PayPal Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, PayPal Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Frontier Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Frontier Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with PayPal Holdings and Frontier Lithium

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

The idea behind PayPal Holdings and Frontier Lithium 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.