Correlation Between PayPal Holdings and DIGNITY

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Can any of the company-specific risk be diversified away by investing in both PayPal Holdings and DIGNITY 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 DIGNITY into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PayPal Holdings and DIGNITY HEALTH 3812, you can compare the effects of market volatilities on PayPal Holdings and DIGNITY 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 DIGNITY. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and DIGNITY.

Diversification Opportunities for PayPal Holdings and DIGNITY

-0.05
  Correlation Coefficient

Good diversification

The 3 months correlation between PayPal and DIGNITY is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and DIGNITY HEALTH 3812 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIGNITY HEALTH 3812 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 DIGNITY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIGNITY HEALTH 3812 has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and DIGNITY go up and down completely randomly.

Pair Corralation between PayPal Holdings and DIGNITY

Given the investment horizon of 90 days PayPal Holdings is expected to generate 2.12 times more return on investment than DIGNITY. However, PayPal Holdings is 2.12 times more volatile than DIGNITY HEALTH 3812. It trades about 0.19 of its potential returns per unit of risk. DIGNITY HEALTH 3812 is currently generating about -0.08 per unit of risk. If you would invest  7,043  in PayPal Holdings on August 28, 2024 and sell it today you would earn a total of  1,734  from holding PayPal Holdings or generate 24.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy38.1%
ValuesDaily Returns

PayPal Holdings  vs.  DIGNITY HEALTH 3812

 Performance 
       Timeline  
PayPal Holdings 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 15 (%) 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.
DIGNITY HEALTH 3812 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days DIGNITY HEALTH 3812 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, DIGNITY is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

PayPal Holdings and DIGNITY Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PayPal Holdings and DIGNITY

The main advantage of trading using opposite PayPal Holdings and DIGNITY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, DIGNITY 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 DIGNITY will offset losses from the drop in DIGNITY's long position.
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The idea behind PayPal Holdings and DIGNITY HEALTH 3812 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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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 Transaction History module to view history of all your transactions and understand their impact on performance.

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