Correlation Between PayPal Holdings and MGP Ingredients

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

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

Diversification Opportunities for PayPal Holdings and MGP Ingredients

-0.74

Correlation Coefficient

PayPal Holdings  MGP Ingredients

Pay attention - limited upside

The 3 months correlation between PayPal and MGP is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and MGP Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGP Ingredients 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 MGP Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGP Ingredients has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and MGP Ingredients go up and down completely randomly.

Pair Corralation between PayPal Holdings and MGP Ingredients

Given the investment horizon of 90 days PayPal Holdings is expected to generate 0.88 times more return on investment than MGP Ingredients. However, PayPal Holdings is 1.13 times less risky than MGP Ingredients. It trades about 0.02 of its potential returns per unit of risk. MGP Ingredients is currently generating about -0.06 per unit of risk. If you would invest  7,948  in PayPal Holdings on October 4, 2024 and sell it today you would earn a total of  570.00  from holding PayPal Holdings or generate 7.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.0%
Values	Daily Returns

PayPal Holdings  vs.  MGP Ingredients

PayPal Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, PayPal Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

MGP Ingredients

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MGP Ingredients has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with PayPal Holdings and MGP Ingredients

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

The idea behind PayPal Holdings and MGP Ingredients 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..