Correlation Between PayPal Holdings and Square
Can any of the company-specific risk be diversified away by investing in both PayPal Holdings and Square 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 Square into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PayPal Holdings and Square Inc, you can compare the effects of market volatilities on PayPal Holdings and Square 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 Square. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and Square.
Diversification Opportunities for PayPal Holdings and Square
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between PayPal and Square is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Square Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Square Inc 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 Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Square Inc has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Square go up and down completely randomly.
Pair Corralation between PayPal Holdings and Square
Assuming the 90 days horizon PayPal Holdings is expected to generate 1.67 times less return on investment than Square. But when comparing it to its historical volatility, PayPal Holdings is 1.52 times less risky than Square. It trades about 0.1 of its potential returns per unit of risk. Square Inc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 3,674 in Square Inc on August 25, 2024 and sell it today you would earn a total of 5,197 from holding Square Inc or generate 141.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
PayPal Holdings vs. Square Inc
Performance |
| Timeline |
| PayPal Holdings |
| Square Inc |
PayPal Holdings and Square Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PayPal Holdings and Square
The main advantage of trading using opposite PayPal Holdings and Square positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, Square 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 Square will offset losses from the drop in Square's long position.| PayPal Holdings vs. Superior Plus Corp | PayPal Holdings vs. NMI Holdings | PayPal Holdings vs. Origin Agritech | PayPal Holdings vs. SIVERS SEMICONDUCTORS AB |
| Square vs. Shopify | Square vs. BYD Company Limited | Square vs. PayPal Holdings | Square vs. Palantir Technologies |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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