Correlation Between PayPal Holdings and BUILDERS FIRSTSOURC
Can any of the company-specific risk be diversified away by investing in both PayPal Holdings and BUILDERS FIRSTSOURC 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 BUILDERS FIRSTSOURC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PayPal Holdings and BUILDERS FIRSTSOURC, you can compare the effects of market volatilities on PayPal Holdings and BUILDERS FIRSTSOURC 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 BUILDERS FIRSTSOURC. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and BUILDERS FIRSTSOURC.
Diversification Opportunities for PayPal Holdings and BUILDERS FIRSTSOURC
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between PayPal and BUILDERS is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and BUILDERS FIRSTSOURC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BUILDERS FIRSTSOURC 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 BUILDERS FIRSTSOURC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BUILDERS FIRSTSOURC has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and BUILDERS FIRSTSOURC go up and down completely randomly.
Pair Corralation between PayPal Holdings and BUILDERS FIRSTSOURC
Given the investment horizon of 90 days PayPal Holdings is expected to generate 1.22 times less return on investment than BUILDERS FIRSTSOURC. But when comparing it to its historical volatility, PayPal Holdings is 1.31 times less risky than BUILDERS FIRSTSOURC. It trades about 0.08 of its potential returns per unit of risk. BUILDERS FIRSTSOURC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 11,185 in BUILDERS FIRSTSOURC on September 4, 2024 and sell it today you would earn a total of 6,635 from holding BUILDERS FIRSTSOURC or generate 59.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.31% |
| Values | Daily Returns |
PayPal Holdings vs. BUILDERS FIRSTSOURC
Performance |
| Timeline |
| PayPal Holdings |
| BUILDERS FIRSTSOURC |
PayPal Holdings and BUILDERS FIRSTSOURC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PayPal Holdings and BUILDERS FIRSTSOURC
The main advantage of trading using opposite PayPal Holdings and BUILDERS FIRSTSOURC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, BUILDERS FIRSTSOURC 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 BUILDERS FIRSTSOURC will offset losses from the drop in BUILDERS FIRSTSOURC's long position.| PayPal Holdings vs. American Express | PayPal Holdings vs. Upstart Holdings | PayPal Holdings vs. Capital One Financial | PayPal Holdings vs. Visa Class A |
| BUILDERS FIRSTSOURC vs. TYSON FOODS A | BUILDERS FIRSTSOURC vs. Premier Foods PLC | BUILDERS FIRSTSOURC vs. VIAPLAY GROUP AB | BUILDERS FIRSTSOURC vs. ePlay Digital |
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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