Correlation Between PayPal Holdings and Nextferm Technologies

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

Diversification Opportunities for PayPal Holdings and Nextferm Technologies

-0.82
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between PayPal and Nextferm is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Nextferm Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextferm Technologies 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 Nextferm Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextferm Technologies has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Nextferm Technologies go up and down completely randomly.

Pair Corralation between PayPal Holdings and Nextferm Technologies

Given the investment horizon of 90 days PayPal Holdings is expected to generate 0.36 times more return on investment than Nextferm Technologies. However, PayPal Holdings is 2.75 times less risky than Nextferm Technologies. It trades about 0.07 of its potential returns per unit of risk. Nextferm Technologies is currently generating about -0.04 per unit of risk. If you would invest  5,951  in PayPal Holdings on September 12, 2024 and sell it today you would earn a total of  2,925  from holding PayPal Holdings or generate 49.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy77.64%
ValuesDaily Returns

PayPal Holdings  vs.  Nextferm Technologies

 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.
Nextferm Technologies 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Nextferm Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

PayPal Holdings and Nextferm Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PayPal Holdings and Nextferm Technologies

The main advantage of trading using opposite PayPal Holdings and Nextferm Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, Nextferm Technologies 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 Nextferm Technologies will offset losses from the drop in Nextferm Technologies' long position.
The idea behind PayPal Holdings and Nextferm Technologies 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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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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