Correlation Between PayPal Holdings and Level

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

By analyzing existing cross correlation between PayPal Holdings and Level 3 Financing, you can compare the effects of market volatilities on PayPal Holdings and Level 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 Level. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and Level.

Diversification Opportunities for PayPal Holdings and Level

0.43

Correlation Coefficient

PayPal Holdings  Level

Very weak diversification

The 3 months correlation between PayPal and Level is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Level 3 Financing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Level 3 Financing 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 Level. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Level 3 Financing has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Level go up and down completely randomly.

Pair Corralation between PayPal Holdings and Level

Given the investment horizon of 90 days PayPal Holdings is expected to generate 5.07 times less return on investment than Level. But when comparing it to its historical volatility, PayPal Holdings is 3.13 times less risky than Level. It trades about 0.02 of its potential returns per unit of risk. Level 3 Financing is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  8,834  in Level 3 Financing on October 7, 2024 and sell it today you would lose (338.00) from holding Level 3 Financing or give up 3.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	78.83%
Values	Daily Returns

PayPal Holdings  vs.  Level 3 Financing

PayPal Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, PayPal Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Level 3 Financing

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Level 3 Financing are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Level may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with PayPal Holdings and Level

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

The idea behind PayPal Holdings and Level 3 Financing 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.