Correlation Between PayPal Holdings and Motorola Solutions

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

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

Diversification Opportunities for PayPal Holdings and Motorola Solutions

0.89

Correlation Coefficient

PayPal Holdings  Motorola Solutions

Very poor diversification

The 3 months correlation between PayPal and Motorola is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Motorola Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motorola Solutions 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 Motorola Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Motorola Solutions has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Motorola Solutions go up and down completely randomly.

Pair Corralation between PayPal Holdings and Motorola Solutions

Given the investment horizon of 90 days PayPal Holdings is expected to under-perform the Motorola Solutions. In addition to that, PayPal Holdings is 1.77 times more volatile than Motorola Solutions. It trades about -0.16 of its total potential returns per unit of risk. Motorola Solutions is currently generating about -0.14 per unit of volatility. If you would invest  71,130  in Motorola Solutions on December 30, 2024 and sell it today you would lose (8,572) from holding Motorola Solutions or give up 12.05% of portfolio value over 90 days.

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

PayPal Holdings  vs.  Motorola Solutions

PayPal Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days PayPal Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Motorola Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Motorola Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with PayPal Holdings and Motorola Solutions

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

The idea behind PayPal Holdings and Motorola Solutions 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.