Correlation Between PayPal Holdings and Shoprite Holdings
Can any of the company-specific risk be diversified away by investing in both PayPal Holdings and Shoprite Holdings 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 Shoprite Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PayPal Holdings and Shoprite Holdings Limited, you can compare the effects of market volatilities on PayPal Holdings and Shoprite Holdings 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 Shoprite Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and Shoprite Holdings.
Diversification Opportunities for PayPal Holdings and Shoprite Holdings
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PayPal and Shoprite is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Shoprite Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shoprite Holdings 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 Shoprite Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shoprite Holdings has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Shoprite Holdings go up and down completely randomly.
Pair Corralation between PayPal Holdings and Shoprite Holdings
Given the investment horizon of 90 days PayPal Holdings is expected to generate 1.63 times less return on investment than Shoprite Holdings. But when comparing it to its historical volatility, PayPal Holdings is 1.43 times less risky than Shoprite Holdings. It trades about 0.03 of its potential returns per unit of risk. Shoprite Holdings Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,435 in Shoprite Holdings Limited on August 30, 2024 and sell it today you would earn a total of 198.00 from holding Shoprite Holdings Limited or generate 13.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 54.03% |
| Values | Daily Returns |
PayPal Holdings vs. Shoprite Holdings Limited
Performance |
| Timeline |
| PayPal Holdings |
| Shoprite Holdings |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
PayPal Holdings and Shoprite Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PayPal Holdings and Shoprite Holdings
The main advantage of trading using opposite PayPal Holdings and Shoprite Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, Shoprite Holdings 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 Shoprite Holdings will offset losses from the drop in Shoprite Holdings' long position.| PayPal Holdings vs. SoFi Technologies | PayPal Holdings vs. Visa Class A | PayPal Holdings vs. Mastercard | PayPal Holdings vs. Capital One Financial |
| Shoprite Holdings vs. Boston Omaha Corp | Shoprite Holdings vs. Organic Sales and | Shoprite Holdings vs. Entravision Communications | Shoprite Holdings vs. Marchex |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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