Correlation Between PayPal Holdings and North Chemical

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Can any of the company-specific risk be diversified away by investing in both PayPal Holdings and North Chemical 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 North Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PayPal Holdings and North Chemical Industries, you can compare the effects of market volatilities on PayPal Holdings and North Chemical 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 North Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and North Chemical.

Diversification Opportunities for PayPal Holdings and North Chemical

0.79
  Correlation Coefficient

Poor diversification

The 3 months correlation between PayPal and North is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and North Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Chemical Industries 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 are associated (or correlated) with North Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Chemical Industries has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and North Chemical go up and down completely randomly.

Pair Corralation between PayPal Holdings and North Chemical

Given the investment horizon of 90 days PayPal Holdings is expected to generate 0.57 times more return on investment than North Chemical. However, PayPal Holdings is 1.75 times less risky than North Chemical. It trades about 0.16 of its potential returns per unit of risk. North Chemical Industries is currently generating about 0.06 per unit of risk. If you would invest  6,064  in PayPal Holdings on September 12, 2024 and sell it today you would earn a total of  2,812  from holding PayPal Holdings or generate 46.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy97.6%
ValuesDaily Returns

PayPal Holdings  vs.  North Chemical Industries

 Performance 
       Timeline  
PayPal Holdings 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, PayPal Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.
North Chemical Industries 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in North Chemical Industries are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, North Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

PayPal Holdings and North Chemical Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PayPal Holdings and North Chemical

The main advantage of trading using opposite PayPal Holdings and North Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, North Chemical 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 North Chemical will offset losses from the drop in North Chemical's long position.
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The idea behind PayPal Holdings and North Chemical Industries pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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