Correlation Between PayPal Holdings and IShares MSCI

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

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

Diversification Opportunities for PayPal Holdings and IShares MSCI

0.73

Correlation Coefficient

PayPal Holdings  IShares MSCI

Poor diversification

The 3 months correlation between PayPal and IShares is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and iShares MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI USA 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 IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI USA has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and IShares MSCI go up and down completely randomly.

Pair Corralation between PayPal Holdings and IShares MSCI

Given the investment horizon of 90 days PayPal Holdings is expected to under-perform the IShares MSCI. In addition to that, PayPal Holdings is 2.67 times more volatile than iShares MSCI USA. It trades about -0.16 of its total potential returns per unit of risk. iShares MSCI USA is currently generating about -0.09 per unit of volatility. If you would invest  12,167  in iShares MSCI USA on December 28, 2024 and sell it today you would lose (690.00) from holding iShares MSCI USA or give up 5.67% of portfolio value over 90 days.

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

PayPal Holdings  vs.  iShares MSCI USA

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 weak 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.

iShares MSCI USA

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares MSCI USA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares MSCI is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PayPal Holdings and IShares MSCI

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

The idea behind PayPal Holdings and iShares MSCI USA 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.