Correlation Between PayPal Holdings and SLM Corp
Can any of the company-specific risk be diversified away by investing in both PayPal Holdings and SLM Corp 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 SLM Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PayPal Holdings and SLM Corp, you can compare the effects of market volatilities on PayPal Holdings and SLM Corp 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 SLM Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and SLM Corp.
Diversification Opportunities for PayPal Holdings and SLM Corp
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between PayPal and SLM is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and SLM Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLM Corp 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 SLM Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SLM Corp has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and SLM Corp go up and down completely randomly.
Pair Corralation between PayPal Holdings and SLM Corp
Given the investment horizon of 90 days PayPal Holdings is expected to under-perform the SLM Corp. In addition to that, PayPal Holdings is 1.4 times more volatile than SLM Corp. It trades about -0.13 of its total potential returns per unit of risk. SLM Corp is currently generating about 0.07 per unit of volatility. If you would invest 2,801 in SLM Corp on December 26, 2024 and sell it today you would earn a total of 203.00 from holding SLM Corp or generate 7.25% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
PayPal Holdings vs. SLM Corp
Performance |
Timeline |
PayPal Holdings |
SLM Corp |
PayPal Holdings and SLM Corp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with PayPal Holdings and SLM Corp
The main advantage of trading using opposite PayPal Holdings and SLM Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, SLM Corp 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 SLM Corp will offset losses from the drop in SLM Corp's long position.PayPal Holdings vs. SoFi Technologies | PayPal Holdings vs. Visa Class A | PayPal Holdings vs. Mastercard | PayPal Holdings vs. Capital One Financial |
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Check out your portfolio center.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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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