Correlation Between PayPal Holdings and CVS HEALTH
Can any of the company-specific risk be diversified away by investing in both PayPal Holdings and CVS HEALTH 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 CVS HEALTH into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PayPal Holdings CDR and CVS HEALTH CDR, you can compare the effects of market volatilities on PayPal Holdings and CVS HEALTH 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 CVS HEALTH. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and CVS HEALTH.
Diversification Opportunities for PayPal Holdings and CVS HEALTH
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between PayPal and CVS is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings CDR and CVS HEALTH CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS HEALTH CDR 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 CDR are associated (or correlated) with CVS HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS HEALTH CDR has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and CVS HEALTH go up and down completely randomly.
Pair Corralation between PayPal Holdings and CVS HEALTH
Assuming the 90 days trading horizon PayPal Holdings is expected to generate 18.4 times less return on investment than CVS HEALTH. In addition to that, PayPal Holdings is 1.14 times more volatile than CVS HEALTH CDR. It trades about 0.03 of its total potential returns per unit of risk. CVS HEALTH CDR is currently generating about 0.56 per unit of volatility. If you would invest 1,125 in CVS HEALTH CDR on November 4, 2024 and sell it today you would earn a total of 276.00 from holding CVS HEALTH CDR or generate 24.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PayPal Holdings CDR vs. CVS HEALTH CDR
Performance |
| Timeline |
| PayPal Holdings CDR |
| CVS HEALTH CDR |
PayPal Holdings and CVS HEALTH Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PayPal Holdings and CVS HEALTH
The main advantage of trading using opposite PayPal Holdings and CVS HEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, CVS HEALTH 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 CVS HEALTH will offset losses from the drop in CVS HEALTH's long position.| PayPal Holdings vs. Westshore Terminals Investment | PayPal Holdings vs. NeXGold Mining Corp | PayPal Holdings vs. Solid Impact Investments | PayPal Holdings vs. Canaf Investments |
| CVS HEALTH vs. Firan Technology Group | CVS HEALTH vs. Sangoma Technologies Corp | CVS HEALTH vs. Costco Wholesale 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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