Correlation Between PayPal Holdings and Farm Pride

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

Diversification Opportunities for PayPal Holdings and Farm Pride

0.22
  Correlation Coefficient

Modest diversification

The 3 months correlation between PayPal and Farm is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Farm Pride Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farm Pride Foods 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 Farm Pride. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farm Pride Foods has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Farm Pride go up and down completely randomly.

Pair Corralation between PayPal Holdings and Farm Pride

Given the investment horizon of 90 days PayPal Holdings is expected to generate 0.3 times more return on investment than Farm Pride. However, PayPal Holdings is 3.33 times less risky than Farm Pride. It trades about 0.07 of its potential returns per unit of risk. Farm Pride Foods is currently generating about -0.05 per unit of risk. If you would invest  8,694  in PayPal Holdings on September 12, 2024 and sell it today you would earn a total of  182.00  from holding PayPal Holdings or generate 2.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.45%
ValuesDaily Returns

PayPal Holdings  vs.  Farm Pride Foods

 Performance 
       Timeline  
PayPal Holdings 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, PayPal Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.
Farm Pride Foods 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Farm Pride Foods are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Farm Pride may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PayPal Holdings and Farm Pride Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PayPal Holdings and Farm Pride

The main advantage of trading using opposite PayPal Holdings and Farm Pride positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, Farm Pride 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 Farm Pride will offset losses from the drop in Farm Pride's long position.
The idea behind PayPal Holdings and Farm Pride Foods 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.
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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