Correlation Between Exxon and PayPal Holdings
Can any of the company-specific risk be diversified away by investing in both Exxon 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 Exxon and PayPal Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Exxon Mobil Corp and PayPal Holdings, you can compare the effects of market volatilities on Exxon 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 Exxon with a short position of PayPal Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and PayPal Holdings.
Diversification Opportunities for Exxon and PayPal Holdings
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Exxon and PayPal is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and PayPal Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PayPal Holdings and Exxon 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 Exxon Mobil Corp 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 Exxon i.e., Exxon and PayPal Holdings go up and down completely randomly.
Pair Corralation between Exxon and PayPal Holdings
Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.5 times more return on investment than PayPal Holdings. However, Exxon Mobil Corp is 2.02 times less risky than PayPal Holdings. It trades about -0.06 of its potential returns per unit of risk. PayPal Holdings is currently generating about -0.17 per unit of risk. If you would invest 11,327 in Exxon Mobil Corp on December 4, 2024 and sell it today you would lose (573.00) from holding Exxon Mobil Corp or give up 5.06% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Exxon Mobil Corp vs. PayPal Holdings
Performance |
Timeline |
Exxon Mobil Corp |
PayPal Holdings |
Exxon and PayPal Holdings Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Exxon and PayPal Holdings
The main advantage of trading using opposite Exxon and PayPal Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon 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.Exxon vs. Shell PLC ADR | Exxon vs. BP PLC ADR | Exxon vs. Suncor Energy | Exxon vs. Petroleo Brasileiro Petrobras |
PayPal Holdings vs. SoFi Technologies | PayPal Holdings vs. Visa Class A | PayPal Holdings vs. Mastercard | PayPal Holdings vs. Capital One Financial |
Check out your portfolio center.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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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