Correlation Between PayPal Holdings and NexGen Energy
Can any of the company-specific risk be diversified away by investing in both PayPal Holdings and NexGen Energy 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 NexGen Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PayPal Holdings and NexGen Energy, you can compare the effects of market volatilities on PayPal Holdings and NexGen Energy 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 NexGen Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and NexGen Energy.
Diversification Opportunities for PayPal Holdings and NexGen Energy
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between PayPal and NexGen is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and NexGen Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexGen Energy 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 NexGen Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NexGen Energy has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and NexGen Energy go up and down completely randomly.
Pair Corralation between PayPal Holdings and NexGen Energy
Given the investment horizon of 90 days PayPal Holdings is expected to generate 1.7 times less return on investment than NexGen Energy. But when comparing it to its historical volatility, PayPal Holdings is 1.83 times less risky than NexGen Energy. It trades about 0.07 of its potential returns per unit of risk. NexGen Energy is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 443.00 in NexGen Energy on September 12, 2024 and sell it today you would earn a total of 342.00 from holding NexGen Energy or generate 77.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.51% |
| Values | Daily Returns |
PayPal Holdings vs. NexGen Energy
Performance |
| Timeline |
| PayPal Holdings |
| NexGen Energy |
PayPal Holdings and NexGen Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PayPal Holdings and NexGen Energy
The main advantage of trading using opposite PayPal Holdings and NexGen Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, NexGen Energy 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 NexGen Energy will offset losses from the drop in NexGen Energy's long position.| PayPal Holdings vs. American Express | PayPal Holdings vs. Capital One Financial | PayPal Holdings vs. Upstart Holdings | PayPal Holdings vs. Ally Financial |
| NexGen Energy vs. CyberArk Software | NexGen Energy vs. Magic Software Enterprises | NexGen Energy vs. Quaker Chemical | NexGen Energy vs. Siamgas And Petrochemicals |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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