Correlation Between PayPal Holdings and VT Industrial

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

Diversification Opportunities for PayPal Holdings and VT Industrial

0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between PayPal and 300707 is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and VT Industrial Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VT Industrial Technology 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 VT Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VT Industrial Technology has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and VT Industrial go up and down completely randomly.

Pair Corralation between PayPal Holdings and VT Industrial

Given the investment horizon of 90 days PayPal Holdings is expected to generate 1.18 times less return on investment than VT Industrial. But when comparing it to its historical volatility, PayPal Holdings is 1.76 times less risky than VT Industrial. It trades about 0.03 of its potential returns per unit of risk. VT Industrial Technology is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,578  in VT Industrial Technology on September 5, 2024 and sell it today you would earn a total of  22.00  from holding VT Industrial Technology or generate 1.39% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy96.36%
ValuesDaily Returns

PayPal Holdings  vs.  VT Industrial Technology

 Performance 
       Timeline  
PayPal Holdings 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, PayPal Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.
VT Industrial Technology 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in VT Industrial Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, VT Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

PayPal Holdings and VT Industrial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PayPal Holdings and VT Industrial

The main advantage of trading using opposite PayPal Holdings and VT Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, VT Industrial 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 VT Industrial will offset losses from the drop in VT Industrial's long position.
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The idea behind PayPal Holdings and VT Industrial Technology 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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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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