Correlation Between PayPal Holdings and MICROSOFT

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

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

Diversification Opportunities for PayPal Holdings and MICROSOFT

-0.03

Correlation Coefficient

PayPal Holdings  MICROSOFT

Good diversification

The 3 months correlation between PayPal and MICROSOFT is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and MICROSOFT PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MICROSOFT PORATION 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 MICROSOFT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MICROSOFT PORATION has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and MICROSOFT go up and down completely randomly.

Pair Corralation between PayPal Holdings and MICROSOFT

Given the investment horizon of 90 days PayPal Holdings is expected to under-perform the MICROSOFT. In addition to that, PayPal Holdings is 1.69 times more volatile than MICROSOFT PORATION. It trades about -0.09 of its total potential returns per unit of risk. MICROSOFT PORATION is currently generating about 0.08 per unit of volatility. If you would invest  6,251  in MICROSOFT PORATION on November 28, 2024 and sell it today you would earn a total of  419.00  from holding MICROSOFT PORATION or generate 6.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.67%
Values	Daily Returns

PayPal Holdings  vs.  MICROSOFT PORATION

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 March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

MICROSOFT PORATION

Risk-Adjusted Performance

OK

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

Pair Trading with PayPal Holdings and MICROSOFT

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

The idea behind PayPal Holdings and MICROSOFT PORATION 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.