Correlation Between PayPal Holdings and Indofood CBP
Can any of the company-specific risk be diversified away by investing in both PayPal Holdings and Indofood CBP 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 Indofood CBP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PayPal Holdings and Indofood CBP Sukses, you can compare the effects of market volatilities on PayPal Holdings and Indofood CBP 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 Indofood CBP. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and Indofood CBP.
Diversification Opportunities for PayPal Holdings and Indofood CBP
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PayPal and Indofood is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Indofood CBP Sukses in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indofood CBP Sukses 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 Indofood CBP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indofood CBP Sukses has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Indofood CBP go up and down completely randomly.
Pair Corralation between PayPal Holdings and Indofood CBP
Given the investment horizon of 90 days PayPal Holdings is expected to generate 0.84 times more return on investment than Indofood CBP. However, PayPal Holdings is 1.19 times less risky than Indofood CBP. It trades about 0.08 of its potential returns per unit of risk. Indofood CBP Sukses is currently generating about 0.0 per unit of risk. If you would invest 6,301 in PayPal Holdings on September 14, 2024 and sell it today you would earn a total of 2,795 from holding PayPal Holdings or generate 44.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PayPal Holdings vs. Indofood CBP Sukses
Performance |
| Timeline |
| PayPal Holdings |
| Indofood CBP Sukses |
PayPal Holdings and Indofood CBP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PayPal Holdings and Indofood CBP
The main advantage of trading using opposite PayPal Holdings and Indofood CBP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, Indofood CBP 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 Indofood CBP will offset losses from the drop in Indofood CBP's long position.| PayPal Holdings vs. SoFi Technologies | PayPal Holdings vs. Visa Class A | PayPal Holdings vs. Mastercard | PayPal Holdings vs. Capital One Financial |
| Indofood CBP vs. Indofood Sukses Makmur | Indofood CBP vs. First Pacific | Indofood CBP vs. Grupo Herdez SAB | Indofood CBP vs. Fraser and Neave |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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