Correlation Between QUALCOMM Incorporated and PayPal Holdings

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

By analyzing existing cross correlation between QUALCOMM Incorporated and PayPal Holdings CDR, you can compare the effects of market volatilities on QUALCOMM Incorporated and PayPal Holdings 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 QUALCOMM Incorporated with a short position of PayPal Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of QUALCOMM Incorporated and PayPal Holdings.

Diversification Opportunities for QUALCOMM Incorporated and PayPal Holdings

-0.69

Correlation Coefficient

QUALCOMM Incorporated  PayPal Holdings

Excellent diversification

The 3 months correlation between QUALCOMM and PayPal is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding QUALCOMM Incorporated and PayPal Holdings CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PayPal Holdings CDR and QUALCOMM Incorporated 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 QUALCOMM Incorporated are associated (or correlated) with PayPal Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PayPal Holdings CDR has no effect on the direction of QUALCOMM Incorporated i.e., QUALCOMM Incorporated and PayPal Holdings go up and down completely randomly.

Pair Corralation between QUALCOMM Incorporated and PayPal Holdings

Assuming the 90 days trading horizon QUALCOMM Incorporated is expected to under-perform the PayPal Holdings. But the stock apears to be less risky and, when comparing its historical volatility, QUALCOMM Incorporated is 1.52 times less risky than PayPal Holdings. The stock trades about -0.05 of its potential returns per unit of risk. The PayPal Holdings CDR is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  645.00  in PayPal Holdings CDR on September 23, 2024 and sell it today you would earn a total of  4.00  from holding PayPal Holdings CDR or generate 0.62% return on investment over 90 days.

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

QUALCOMM Incorporated  vs.  PayPal Holdings CDR

QUALCOMM Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days QUALCOMM Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

PayPal Holdings CDR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings CDR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, PayPal Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with QUALCOMM Incorporated and PayPal Holdings

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

The idea behind QUALCOMM Incorporated and PayPal Holdings CDR 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.