Correlation Between PayPal Holdings and Invesco Small

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

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

Diversification Opportunities for PayPal Holdings and Invesco Small

0.88

Correlation Coefficient

PayPal Holdings  Invesco Small

Very poor diversification

The 3 months correlation between PayPal and Invesco is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Invesco Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Small Cap 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 Invesco Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Small Cap has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Invesco Small go up and down completely randomly.

Pair Corralation between PayPal Holdings and Invesco Small

Given the investment horizon of 90 days PayPal Holdings is expected to generate 1.48 times more return on investment than Invesco Small. However, PayPal Holdings is 1.48 times more volatile than Invesco Small Cap. It trades about 0.16 of its potential returns per unit of risk. Invesco Small Cap is currently generating about 0.19 per unit of risk. If you would invest  7,261  in PayPal Holdings on September 4, 2024 and sell it today you would earn a total of  1,392  from holding PayPal Holdings or generate 19.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

PayPal Holdings  vs.  Invesco Small Cap

PayPal Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 12 (%) 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.

Invesco Small Cap

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Small Cap are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Invesco Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PayPal Holdings and Invesco Small

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

The idea behind PayPal Holdings and Invesco Small Cap 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.