Correlation Between PayPal Holdings and Rotork Plc

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

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

Diversification Opportunities for PayPal Holdings and Rotork Plc

-0.4

Correlation Coefficient

PayPal Holdings  Rotork Plc

Very good diversification

The 3 months correlation between PayPal and Rotork is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Rotork plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rotork plc 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 Rotork Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rotork plc has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Rotork Plc go up and down completely randomly.

Pair Corralation between PayPal Holdings and Rotork Plc

Given the investment horizon of 90 days PayPal Holdings is expected to under-perform the Rotork Plc. But the stock apears to be less risky and, when comparing its historical volatility, PayPal Holdings is 1.91 times less risky than Rotork Plc. The stock trades about -0.13 of its potential returns per unit of risk. The Rotork plc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  377.00  in Rotork plc on December 22, 2024 and sell it today you would earn a total of  3.00  from holding Rotork plc or generate 0.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.16%
Values	Daily Returns

PayPal Holdings  vs.  Rotork plc

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.

Rotork plc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rotork plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Rotork Plc may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with PayPal Holdings and Rotork Plc

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

The idea behind PayPal Holdings and Rotork plc 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.