Correlation Between Apple and PayPal Holdings
Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and PayPal Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and PayPal Holdings, you can compare the effects of market volatilities on Apple 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 Apple with a short position of PayPal Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and PayPal Holdings.
Diversification Opportunities for Apple and PayPal Holdings
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Apple and PayPal is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and PayPal Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PayPal Holdings and Apple 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 Apple Inc 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 Apple i.e., Apple and PayPal Holdings go up and down completely randomly.
Pair Corralation between Apple and PayPal Holdings
Assuming the 90 days trading horizon Apple is expected to generate 2.69 times less return on investment than PayPal Holdings. But when comparing it to its historical volatility, Apple Inc is 1.15 times less risky than PayPal Holdings. It trades about 0.09 of its potential returns per unit of risk. PayPal Holdings is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 6,506 in PayPal Holdings on September 2, 2024 and sell it today you would earn a total of 1,698 from holding PayPal Holdings or generate 26.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. PayPal Holdings
Performance |
| Timeline |
| Apple Inc |
| PayPal Holdings |
Apple and PayPal Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and PayPal Holdings
The main advantage of trading using opposite Apple and PayPal Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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.| Apple vs. Sunstone Hotel Investors | Apple vs. Choice Hotels International | Apple vs. Luckin Coffee | Apple vs. Summit Hotel Properties |
| PayPal Holdings vs. Commonwealth Bank of | PayPal Holdings vs. Iridium Communications | PayPal Holdings vs. REVO INSURANCE SPA | PayPal Holdings vs. National Bank Holdings |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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