Correlation Between PayPal Holdings and Peabody Energy
Can any of the company-specific risk be diversified away by investing in both PayPal Holdings and Peabody Energy 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 Peabody Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PayPal Holdings and Peabody Energy, you can compare the effects of market volatilities on PayPal Holdings and Peabody Energy 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 Peabody Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and Peabody Energy.
Diversification Opportunities for PayPal Holdings and Peabody Energy
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between PayPal and Peabody is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Peabody Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peabody Energy 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 Peabody Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peabody Energy has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Peabody Energy go up and down completely randomly.
Pair Corralation between PayPal Holdings and Peabody Energy
Given the investment horizon of 90 days PayPal Holdings is expected to generate 0.53 times more return on investment than Peabody Energy. However, PayPal Holdings is 1.9 times less risky than Peabody Energy. It trades about 0.35 of its potential returns per unit of risk. Peabody Energy is currently generating about -0.07 per unit of risk. If you would invest 7,813 in PayPal Holdings on September 3, 2024 and sell it today you would earn a total of 864.00 from holding PayPal Holdings or generate 11.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
PayPal Holdings vs. Peabody Energy
Performance |
| Timeline |
| PayPal Holdings |
| Peabody Energy |
PayPal Holdings and Peabody Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PayPal Holdings and Peabody Energy
The main advantage of trading using opposite PayPal Holdings and Peabody Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, Peabody Energy 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 Peabody Energy will offset losses from the drop in Peabody Energy's long position.| PayPal Holdings vs. American Express | PayPal Holdings vs. Capital One Financial | PayPal Holdings vs. Upstart Holdings | PayPal Holdings vs. Ally Financial |
| Peabody Energy vs. American Eagle Outfitters | Peabody Energy vs. CECO ENVIRONMENTAL | Peabody Energy vs. BlueScope Steel Limited | Peabody Energy vs. Grand Canyon Education |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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