Correlation Between Solar Alliance and PayPal Holdings

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

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

Diversification Opportunities for Solar Alliance and PayPal Holdings

-0.63

Correlation Coefficient

Solar Alliance  PayPal Holdings

Excellent diversification

The 3 months correlation between Solar and PayPal is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Solar Alliance Energy 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 Solar Alliance 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 Solar Alliance Energy 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 Solar Alliance i.e., Solar Alliance and PayPal Holdings go up and down completely randomly.

Pair Corralation between Solar Alliance and PayPal Holdings

Assuming the 90 days trading horizon Solar Alliance Energy is expected to under-perform the PayPal Holdings. In addition to that, Solar Alliance is 2.88 times more volatile than PayPal Holdings CDR. It trades about -0.23 of its total potential returns per unit of risk. PayPal Holdings CDR is currently generating about -0.09 per unit of volatility. If you would invest  665.00  in PayPal Holdings CDR on October 5, 2024 and sell it today you would lose (24.00) from holding PayPal Holdings CDR or give up 3.61% of portfolio value over 90 days.

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

Solar Alliance Energy  vs.  PayPal Holdings CDR

Solar Alliance Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solar Alliance Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Solar Alliance is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

PayPal Holdings CDR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings CDR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, PayPal Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Solar Alliance and PayPal Holdings

The main advantage of trading using opposite Solar Alliance and PayPal Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solar Alliance 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 Solar Alliance Energy 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 Global Correlations module to find global opportunities by holding instruments from different markets.