Correlation Between Amazon CDR and PayPal Holdings
Can any of the company-specific risk be diversified away by investing in both Amazon CDR 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 Amazon CDR and PayPal Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon CDR and PayPal Holdings CDR, you can compare the effects of market volatilities on Amazon CDR 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 Amazon CDR with a short position of PayPal Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon CDR and PayPal Holdings.
Diversification Opportunities for Amazon CDR and PayPal Holdings
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amazon and PayPal is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Amazon CDR and PayPal Holdings CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PayPal Holdings CDR and Amazon CDR 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 Amazon CDR 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 CDR has no effect on the direction of Amazon CDR i.e., Amazon CDR and PayPal Holdings go up and down completely randomly.
Pair Corralation between Amazon CDR and PayPal Holdings
Assuming the 90 days trading horizon Amazon CDR is expected to generate 0.88 times more return on investment than PayPal Holdings. However, Amazon CDR is 1.14 times less risky than PayPal Holdings. It trades about 0.09 of its potential returns per unit of risk. PayPal Holdings CDR is currently generating about 0.02 per unit of risk. If you would invest 1,095 in Amazon CDR on August 30, 2024 and sell it today you would earn a total of 1,356 from holding Amazon CDR or generate 123.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon CDR vs. PayPal Holdings CDR
Performance |
| Timeline |
| Amazon CDR |
| PayPal Holdings CDR |
Amazon CDR and PayPal Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon CDR and PayPal Holdings
The main advantage of trading using opposite Amazon CDR and PayPal Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon CDR 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.| Amazon CDR vs. Maple Leaf Foods | Amazon CDR vs. Solid Impact Investments | Amazon CDR vs. Leons Furniture Limited | Amazon CDR vs. Algonquin Power Utilities |
| PayPal Holdings vs. Apple Inc CDR | PayPal Holdings vs. NVIDIA CDR | PayPal Holdings vs. Microsoft Corp CDR | PayPal Holdings vs. Amazon CDR |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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