Correlation Between PayPal Holdings and IShares Trust

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Can any of the company-specific risk be diversified away by investing in both PayPal Holdings and IShares Trust 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 IShares Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PayPal Holdings and iShares Trust , you can compare the effects of market volatilities on PayPal Holdings and IShares Trust 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 IShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and IShares Trust.

Diversification Opportunities for PayPal Holdings and IShares Trust

0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between PayPal and IShares is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust 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 IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and IShares Trust go up and down completely randomly.

Pair Corralation between PayPal Holdings and IShares Trust

If you would invest  7,813  in PayPal Holdings on September 5, 2024 and sell it today you would earn a total of  1,120  from holding PayPal Holdings or generate 14.34% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

PayPal Holdings  vs.  iShares Trust

 Performance 
       Timeline  
PayPal Holdings 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
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.
iShares Trust 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward-looking indicators, IShares Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

PayPal Holdings and IShares Trust Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PayPal Holdings and IShares Trust

The main advantage of trading using opposite PayPal Holdings and IShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, IShares Trust 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 IShares Trust will offset losses from the drop in IShares Trust's long position.
The idea behind PayPal Holdings and iShares Trust 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.
Check out your portfolio center.
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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