Correlation Between PayPal Holdings and Flying Nickel

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

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

Diversification Opportunities for PayPal Holdings and Flying Nickel

0.07

Correlation Coefficient

PayPal Holdings  Flying Nickel

Significant diversification

The 3 months correlation between PayPal and Flying is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Flying Nickel Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flying Nickel Mining 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 Flying Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flying Nickel Mining has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Flying Nickel go up and down completely randomly.

Pair Corralation between PayPal Holdings and Flying Nickel

Given the investment horizon of 90 days PayPal Holdings is expected to generate 2.76 times less return on investment than Flying Nickel. But when comparing it to its historical volatility, PayPal Holdings is 9.37 times less risky than Flying Nickel. It trades about 0.14 of its potential returns per unit of risk. Flying Nickel Mining is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5.35  in Flying Nickel Mining on September 4, 2024 and sell it today you would lose (1.85) from holding Flying Nickel Mining or give up 34.58% of portfolio value over 90 days.

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

PayPal Holdings  vs.  Flying Nickel Mining

PayPal Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 11 (%) 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.

Flying Nickel Mining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Flying Nickel Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Flying Nickel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PayPal Holdings and Flying Nickel

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

The idea behind PayPal Holdings and Flying Nickel Mining 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.