Correlation Between PayPal Holdings and Mentor Capital

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

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

Diversification Opportunities for PayPal Holdings and Mentor Capital

-0.47

Correlation Coefficient

PayPal Holdings  Mentor Capital

Very good diversification

The 3 months correlation between PayPal and Mentor is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Mentor Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mentor Capital 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 Mentor Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mentor Capital has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Mentor Capital go up and down completely randomly.

Pair Corralation between PayPal Holdings and Mentor Capital

Given the investment horizon of 90 days PayPal Holdings is expected to generate 7.9 times less return on investment than Mentor Capital. But when comparing it to its historical volatility, PayPal Holdings is 6.26 times less risky than Mentor Capital. It trades about 0.07 of its potential returns per unit of risk. Mentor Capital is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Mentor Capital on September 12, 2024 and sell it today you would earn a total of  3.68  from holding Mentor Capital or generate 184.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.7%
Values	Daily Returns

PayPal Holdings  vs.  Mentor Capital

PayPal Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, PayPal Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Mentor Capital

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mentor Capital are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Mentor Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PayPal Holdings and Mentor Capital

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

The idea behind PayPal Holdings and Mentor Capital 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.