Correlation Between PayPal Holdings and Small Cap
Can any of the company-specific risk be diversified away by investing in both PayPal Holdings and Small Cap 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 Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PayPal Holdings and Small Cap Equity, you can compare the effects of market volatilities on PayPal Holdings and Small Cap 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 Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and Small Cap.
Diversification Opportunities for PayPal Holdings and Small Cap
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between PayPal and Small is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Small Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Equity 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Equity has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Small Cap go up and down completely randomly.
Pair Corralation between PayPal Holdings and Small Cap
Given the investment horizon of 90 days PayPal Holdings is expected to generate 1.66 times more return on investment than Small Cap. However, PayPal Holdings is 1.66 times more volatile than Small Cap Equity. It trades about 0.07 of its potential returns per unit of risk. Small Cap Equity is currently generating about -0.06 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 Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
PayPal Holdings vs. Small Cap Equity
Performance |
| Timeline |
| PayPal Holdings |
| Small Cap Equity |
PayPal Holdings and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PayPal Holdings and Small Cap
The main advantage of trading using opposite PayPal Holdings and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| PayPal Holdings vs. American Express | PayPal Holdings vs. Capital One Financial | PayPal Holdings vs. Upstart Holdings | PayPal Holdings vs. Ally Financial |
| Small Cap vs. John Hancock Disciplined | Small Cap vs. Oppenheimer International Growth | Small Cap vs. Hartford Schroders Emerging | Small Cap vs. Edgewood Growth Fund |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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