Correlation Between PayPal Holdings and JPMorgan Chase

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

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

Diversification Opportunities for PayPal Holdings and JPMorgan Chase

0.82

Correlation Coefficient

PayPal Holdings  JPMorgan Chase

Very poor diversification

The 3 months correlation between PayPal and JPMorgan is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and JPMorgan Chase Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Chase 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 JPMorgan Chase. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Chase has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and JPMorgan Chase go up and down completely randomly.

Pair Corralation between PayPal Holdings and JPMorgan Chase

Given the investment horizon of 90 days PayPal Holdings is expected to generate 1.89 times less return on investment than JPMorgan Chase. In addition to that, PayPal Holdings is 1.47 times more volatile than JPMorgan Chase Co. It trades about 0.04 of its total potential returns per unit of risk. JPMorgan Chase Co is currently generating about 0.1 per unit of volatility. If you would invest  243,721  in JPMorgan Chase Co on September 13, 2024 and sell it today you would earn a total of  245,979  from holding JPMorgan Chase Co or generate 100.93% return on investment over 90 days.

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

PayPal Holdings  vs.  JPMorgan Chase Co

PayPal Holdings

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 18 (%) 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.

JPMorgan Chase

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Chase Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, JPMorgan Chase showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PayPal Holdings and JPMorgan Chase

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

The idea behind PayPal Holdings and JPMorgan Chase Co 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.