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

-0.54

Correlation Coefficient

Exxon  PayPal Holdings

Excellent diversification

The 3 months correlation between Exxon and PayPal is -0.54. 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 0.56 times more return on investment than PayPal Holdings. However, Exxon Mobil Corp is 1.8 times less risky than PayPal Holdings. It trades about 0.14 of its potential returns per unit of risk. PayPal Holdings is currently generating about -0.13 per unit of risk. If you would invest  10,554  in Exxon Mobil Corp on December 27, 2024 and sell it today you would earn a total of  1,273  from holding Exxon Mobil Corp or generate 12.06% return on investment over 90 days.

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

Exxon Mobil Corp  vs.  PayPal Holdings

Exxon Mobil Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Exxon may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 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.

The idea behind Exxon Mobil Corp 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..