Correlation Between PayPal Holdings and NVIDIA
Can any of the company-specific risk be diversified away by investing in both PayPal Holdings and NVIDIA 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 NVIDIA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PayPal Holdings and NVIDIA, you can compare the effects of market volatilities on PayPal Holdings and NVIDIA 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 NVIDIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and NVIDIA.
Diversification Opportunities for PayPal Holdings and NVIDIA
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between PayPal and NVIDIA is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and NVIDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA 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 NVIDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVIDIA has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and NVIDIA go up and down completely randomly.
Pair Corralation between PayPal Holdings and NVIDIA
Given the investment horizon of 90 days PayPal Holdings is expected to generate 0.62 times more return on investment than NVIDIA. However, PayPal Holdings is 1.61 times less risky than NVIDIA. It trades about 0.07 of its potential returns per unit of risk. NVIDIA is currently generating about -0.22 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PayPal Holdings vs. NVIDIA
Performance |
| Timeline |
| PayPal Holdings |
| NVIDIA |
PayPal Holdings and NVIDIA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PayPal Holdings and NVIDIA
The main advantage of trading using opposite PayPal Holdings and NVIDIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, NVIDIA 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 NVIDIA will offset losses from the drop in NVIDIA's long position.| PayPal Holdings vs. American Express | PayPal Holdings vs. Capital One Financial | PayPal Holdings vs. Upstart Holdings | PayPal Holdings vs. Ally Financial |
| NVIDIA vs. Harmony Gold Mining | NVIDIA vs. Telecom Argentina | NVIDIA vs. Transportadora de Gas | NVIDIA vs. United States Steel |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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