Correlation Between PayPal Holdings and Grasim Industries

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

Diversification Opportunities for PayPal Holdings and Grasim Industries

-0.63
  Correlation Coefficient

Excellent diversification

The 3 months correlation between PayPal and Grasim is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Grasim Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grasim Industries 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 Grasim Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grasim Industries has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Grasim Industries go up and down completely randomly.

Pair Corralation between PayPal Holdings and Grasim Industries

Given the investment horizon of 90 days PayPal Holdings is expected to generate 1.26 times more return on investment than Grasim Industries. However, PayPal Holdings is 1.26 times more volatile than Grasim Industries Limited. It trades about 0.34 of its potential returns per unit of risk. Grasim Industries Limited is currently generating about 0.15 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 Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

PayPal Holdings  vs.  Grasim Industries Limited

 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.
Grasim Industries 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Grasim Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Grasim Industries is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

PayPal Holdings and Grasim Industries Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PayPal Holdings and Grasim Industries

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

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