Correlation Between PayPal Holdings and Tesla
Can any of the company-specific risk be diversified away by investing in both PayPal Holdings and Tesla 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 Tesla 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 Tesla Inc CDR, you can compare the effects of market volatilities on PayPal Holdings and Tesla 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 Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and Tesla.
Diversification Opportunities for PayPal Holdings and Tesla
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PayPal and Tesla is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings CDR and Tesla Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc 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 Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc CDR has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Tesla go up and down completely randomly.
Pair Corralation between PayPal Holdings and Tesla
Assuming the 90 days trading horizon PayPal Holdings is expected to generate 2.61 times less return on investment than Tesla. But when comparing it to its historical volatility, PayPal Holdings CDR is 2.94 times less risky than Tesla. It trades about 0.3 of its potential returns per unit of risk. Tesla Inc CDR is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 2,348 in Tesla Inc CDR on August 31, 2024 and sell it today you would earn a total of 692.00 from holding Tesla Inc CDR or generate 29.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PayPal Holdings CDR vs. Tesla Inc CDR
Performance |
| Timeline |
| PayPal Holdings CDR |
| Tesla Inc CDR |
PayPal Holdings and Tesla Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PayPal Holdings and Tesla
The main advantage of trading using opposite PayPal Holdings and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, Tesla 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 Tesla will offset losses from the drop in Tesla's long position.| PayPal Holdings vs. Constellation Software | PayPal Holdings vs. Highwood Asset Management | PayPal Holdings vs. Rogers Communications | PayPal Holdings vs. Questor Technology |
| Tesla vs. Berkshire Hathaway CDR | Tesla vs. JPMorgan Chase Co | Tesla vs. Bank of America | Tesla vs. Alphabet Inc 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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