Correlation Between Upstart Holdings and PayPal Holdings

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

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

Diversification Opportunities for Upstart Holdings and PayPal Holdings

0.39

Correlation Coefficient

Upstart Holdings  PayPal Holdings

Weak diversification

The 3 months correlation between Upstart and PayPal is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Upstart Holdings and PayPal Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PayPal Holdings and Upstart 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 Upstart Holdings 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 has no effect on the direction of Upstart Holdings i.e., Upstart Holdings and PayPal Holdings go up and down completely randomly.

Pair Corralation between Upstart Holdings and PayPal Holdings

Given the investment horizon of 90 days Upstart Holdings is expected to generate 2.4 times more return on investment than PayPal Holdings. However, Upstart Holdings is 2.4 times more volatile than PayPal Holdings. It trades about -0.04 of its potential returns per unit of risk. PayPal Holdings is currently generating about -0.13 per unit of risk. If you would invest  6,332  in Upstart Holdings on December 29, 2024 and sell it today you would lose (1,422) from holding Upstart Holdings or give up 22.46% of portfolio value over 90 days.

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

Upstart Holdings  vs.  PayPal Holdings

Upstart Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Upstart Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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

Pair Trading with Upstart Holdings and PayPal Holdings

The main advantage of trading using opposite Upstart Holdings and PayPal Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Upstart Holdings 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 Upstart Holdings and PayPal Holdings 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.