Correlation Between PayPal Holdings and Banco Santander

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

Diversification Opportunities for PayPal Holdings and Banco Santander

0.49
  Correlation Coefficient

Very weak diversification

The 3 months correlation between PayPal and Banco is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Banco Santander SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Santander SA 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 Banco Santander. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Santander SA has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Banco Santander go up and down completely randomly.

Pair Corralation between PayPal Holdings and Banco Santander

Given the investment horizon of 90 days PayPal Holdings is expected to generate 1.08 times more return on investment than Banco Santander. However, PayPal Holdings is 1.08 times more volatile than Banco Santander SA. It trades about 0.34 of its potential returns per unit of risk. Banco Santander SA is currently generating about -0.09 per unit of risk. If you would invest  7,813  in PayPal Holdings on September 5, 2024 and sell it today you would earn a total of  1,120  from holding PayPal Holdings or generate 14.34% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.65%
ValuesDaily Returns

PayPal Holdings  vs.  Banco Santander SA

 Performance 
       Timeline  
PayPal Holdings 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 11 (%) 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.
Banco Santander SA 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Banco Santander SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Banco Santander is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

PayPal Holdings and Banco Santander Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PayPal Holdings and Banco Santander

The main advantage of trading using opposite PayPal Holdings and Banco Santander positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, Banco Santander 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 Banco Santander will offset losses from the drop in Banco Santander's long position.
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The idea behind PayPal Holdings and Banco Santander SA 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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