Correlation Between Meta Platforms and PayPal Holdings
Can any of the company-specific risk be diversified away by investing in both Meta Platforms 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 Meta Platforms and PayPal Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meta Platforms CDR and PayPal Holdings CDR, you can compare the effects of market volatilities on Meta Platforms 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 Meta Platforms with a short position of PayPal Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meta Platforms and PayPal Holdings.
Diversification Opportunities for Meta Platforms and PayPal Holdings
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Meta and PayPal is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms 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 Meta Platforms 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 Meta Platforms 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 Meta Platforms i.e., Meta Platforms and PayPal Holdings go up and down completely randomly.
Pair Corralation between Meta Platforms and PayPal Holdings
Assuming the 90 days trading horizon Meta Platforms CDR is expected to generate 1.09 times more return on investment than PayPal Holdings. However, Meta Platforms is 1.09 times more volatile than PayPal Holdings CDR. It trades about 0.15 of its potential returns per unit of risk. PayPal Holdings CDR is currently generating about 0.03 per unit of risk. If you would invest 659.00 in Meta Platforms CDR on September 14, 2024 and sell it today you would earn a total of 2,848 from holding Meta Platforms CDR or generate 432.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meta Platforms CDR vs. PayPal Holdings CDR
Performance |
| Timeline |
| Meta Platforms CDR |
| PayPal Holdings CDR |
Meta Platforms and PayPal Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meta Platforms and PayPal Holdings
The main advantage of trading using opposite Meta Platforms and PayPal Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Platforms 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.| Meta Platforms vs. TUT Fitness Group | Meta Platforms vs. Data Communications Management | Meta Platforms vs. UnitedHealth Group CDR | Meta Platforms vs. Dream Office Real |
| PayPal Holdings vs. Computer Modelling Group | PayPal Holdings vs. Arbor Metals Corp | PayPal Holdings vs. Ocumetics Technology Corp | PayPal Holdings vs. Mako Mining Corp |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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