Correlation Between PayPal Holdings and BASF SE
Can any of the company-specific risk be diversified away by investing in both PayPal Holdings and BASF SE 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 BASF SE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PayPal Holdings and BASF SE, you can compare the effects of market volatilities on PayPal Holdings and BASF SE 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 BASF SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and BASF SE.
Diversification Opportunities for PayPal Holdings and BASF SE
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between PayPal and BASF is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and BASF SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE 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 BASF SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BASF SE has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and BASF SE go up and down completely randomly.
Pair Corralation between PayPal Holdings and BASF SE
Given the investment horizon of 90 days PayPal Holdings is expected to generate 0.71 times more return on investment than BASF SE. However, PayPal Holdings is 1.4 times less risky than BASF SE. It trades about 0.35 of its potential returns per unit of risk. BASF SE is currently generating about -0.11 per unit of risk. If you would invest 7,813 in PayPal Holdings on September 3, 2024 and sell it today you would earn a total of 864.00 from holding PayPal Holdings or generate 11.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 70.0% |
| Values | Daily Returns |
PayPal Holdings vs. BASF SE
Performance |
| Timeline |
| PayPal Holdings |
| BASF SE |
PayPal Holdings and BASF SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PayPal Holdings and BASF SE
The main advantage of trading using opposite PayPal Holdings and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, BASF SE 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 BASF SE will offset losses from the drop in BASF SE's long position.| PayPal Holdings vs. American Express | PayPal Holdings vs. Capital One Financial | PayPal Holdings vs. Upstart Holdings | PayPal Holdings vs. Ally Financial |
| BASF SE vs. OTP Bank Nyrt | BASF SE vs. Infineon Technologies AG | BASF SE vs. Delta Technologies Nyrt | BASF SE vs. Commerzbank AG |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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