Correlation Between PayPal Holdings and Federal Home

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

Diversification Opportunities for PayPal Holdings and Federal Home

-0.2
  Correlation Coefficient

Good diversification

The 3 months correlation between PayPal and Federal is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Federal Home Loan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Home Loan 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 Federal Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Home Loan has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Federal Home go up and down completely randomly.

Pair Corralation between PayPal Holdings and Federal Home

Given the investment horizon of 90 days PayPal Holdings is expected to under-perform the Federal Home. In addition to that, PayPal Holdings is 1.32 times more volatile than Federal Home Loan. It trades about -0.29 of its total potential returns per unit of risk. Federal Home Loan is currently generating about -0.11 per unit of volatility. If you would invest  1,833  in Federal Home Loan on November 28, 2024 and sell it today you would lose (108.00) from holding Federal Home Loan or give up 5.89% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

PayPal Holdings  vs.  Federal Home Loan

 Performance 
       Timeline  
PayPal Holdings 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days PayPal Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.
Federal Home Loan 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Federal Home Loan are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively sluggish technical and fundamental indicators, Federal Home reported solid returns over the last few months and may actually be approaching a breakup point.

PayPal Holdings and Federal Home Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PayPal Holdings and Federal Home

The main advantage of trading using opposite PayPal Holdings and Federal Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, Federal Home 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 Federal Home will offset losses from the drop in Federal Home's long position.
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The idea behind PayPal Holdings and Federal Home Loan 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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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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