Correlation Between PayPal Holdings and Office Properties

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

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

Diversification Opportunities for PayPal Holdings and Office Properties

-0.64

Correlation Coefficient

PayPal Holdings  Office Properties

Excellent diversification

The 3 months correlation between PayPal and Office is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Office Properties Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Office Properties Income 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 Office Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Office Properties Income has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Office Properties go up and down completely randomly.

Pair Corralation between PayPal Holdings and Office Properties

Given the investment horizon of 90 days PayPal Holdings is expected to generate 2.88 times less return on investment than Office Properties. But when comparing it to its historical volatility, PayPal Holdings is 5.79 times less risky than Office Properties. It trades about 0.34 of its potential returns per unit of risk. Office Properties Income is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  110.00  in Office Properties Income on September 5, 2024 and sell it today you would earn a total of  38.00  from holding Office Properties Income or generate 34.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

PayPal Holdings  vs.  Office Properties Income

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 inconsistent basic indicators, PayPal Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Office Properties Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Office Properties Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, Office Properties 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 Office Properties

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

The idea behind PayPal Holdings and Office Properties Income 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..