Correlation Between PayPal Holdings and Meta Platforms
Can any of the company-specific risk be diversified away by investing in both PayPal Holdings and Meta Platforms 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 Meta Platforms 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 Meta Platforms CDR, you can compare the effects of market volatilities on PayPal Holdings and Meta Platforms 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 Meta Platforms. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and Meta Platforms.
Diversification Opportunities for PayPal Holdings and Meta Platforms
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between PayPal and Meta is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings CDR and Meta Platforms CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms 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 Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms CDR has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Meta Platforms go up and down completely randomly.
Pair Corralation between PayPal Holdings and Meta Platforms
Assuming the 90 days trading horizon PayPal Holdings CDR is expected to under-perform the Meta Platforms. In addition to that, PayPal Holdings is 2.25 times more volatile than Meta Platforms CDR. It trades about -0.29 of its total potential returns per unit of risk. Meta Platforms CDR is currently generating about -0.01 per unit of volatility. If you would invest 3,654 in Meta Platforms CDR on November 28, 2024 and sell it today you would lose (22.00) from holding Meta Platforms CDR or give up 0.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PayPal Holdings CDR vs. Meta Platforms CDR
Performance |
| Timeline |
| PayPal Holdings CDR |
| Meta Platforms CDR |
PayPal Holdings and Meta Platforms Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PayPal Holdings and Meta Platforms
The main advantage of trading using opposite PayPal Holdings and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, Meta Platforms 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 Meta Platforms will offset losses from the drop in Meta Platforms' long position.| PayPal Holdings vs. XXIX Metal Corp | PayPal Holdings vs. Americas Silver Corp | PayPal Holdings vs. Sun Peak Metals | PayPal Holdings vs. Metalero Mining Corp |
| Meta Platforms vs. Falcon Energy Materials | Meta Platforms vs. Diversified Royalty Corp | Meta Platforms vs. Canadian Utilities Limited | Meta Platforms vs. Algonquin Power Utilities |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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