Correlation Between PayPal Holdings and Dow Jones
Can any of the company-specific risk be diversified away by investing in both PayPal Holdings and Dow Jones 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 PayPal Holdings and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PayPal Holdings and Dow Jones Industrial, you can compare the effects of market volatilities on PayPal Holdings and Dow Jones 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 PayPal Holdings with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and Dow Jones.
Diversification Opportunities for PayPal Holdings and Dow Jones
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between PayPal and Dow is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and PayPal 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 PayPal Holdings are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Dow Jones go up and down completely randomly.
Pair Corralation between PayPal Holdings and Dow Jones
Assuming the 90 days horizon PayPal Holdings is expected to generate 2.03 times more return on investment than Dow Jones. However, PayPal Holdings is 2.03 times more volatile than Dow Jones Industrial. It trades about 0.31 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.37 per unit of risk. If you would invest 7,286 in PayPal Holdings on September 1, 2024 and sell it today you would earn a total of 977.00 from holding PayPal Holdings or generate 13.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
PayPal Holdings vs. Dow Jones Industrial
Performance |
| Timeline |
PayPal Holdings and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
PayPal Holdings
Pair trading matchups for PayPal Holdings
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with PayPal Holdings and Dow Jones
The main advantage of trading using opposite PayPal Holdings and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| PayPal Holdings vs. Microsoft | PayPal Holdings vs. NVIDIA | PayPal Holdings vs. Amazon Inc | PayPal Holdings vs. Square Inc |
| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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