Correlation Between PayPal Holdings and Marks
Can any of the company-specific risk be diversified away by investing in both PayPal Holdings and Marks 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 Marks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PayPal Holdings and Marks and Spencer, you can compare the effects of market volatilities on PayPal Holdings and Marks 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 Marks. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and Marks.
Diversification Opportunities for PayPal Holdings and Marks
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PayPal and Marks is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Marks and Spencer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marks and Spencer 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 Marks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marks and Spencer has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Marks go up and down completely randomly.
Pair Corralation between PayPal Holdings and Marks
Given the investment horizon of 90 days PayPal Holdings is expected to generate 1.06 times less return on investment than Marks. In addition to that, PayPal Holdings is 1.05 times more volatile than Marks and Spencer. It trades about 0.1 of its total potential returns per unit of risk. Marks and Spencer is currently generating about 0.12 per unit of volatility. If you would invest 361.00 in Marks and Spencer on September 5, 2024 and sell it today you would earn a total of 108.00 from holding Marks and Spencer or generate 29.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.9% |
| Values | Daily Returns |
PayPal Holdings vs. Marks and Spencer
Performance |
| Timeline |
| PayPal Holdings |
| Marks and Spencer |
PayPal Holdings and Marks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PayPal Holdings and Marks
The main advantage of trading using opposite PayPal Holdings and Marks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, Marks 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 Marks will offset losses from the drop in Marks' long position.| PayPal Holdings vs. SoFi Technologies | PayPal Holdings vs. Visa Class A | PayPal Holdings vs. Mastercard | PayPal Holdings vs. Capital One Financial |
| Marks vs. CarsalesCom | Marks vs. MAVEN WIRELESS SWEDEN | Marks vs. Entravision Communications | Marks vs. TRADEGATE |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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