Correlation Between PayPal Holdings and SOUTHERN

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

Diversification Opportunities for PayPal Holdings and SOUTHERN

-0.05
  Correlation Coefficient

Good diversification

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

Pair Corralation between PayPal Holdings and SOUTHERN

Given the investment horizon of 90 days PayPal Holdings is expected to generate 87.76 times less return on investment than SOUTHERN. But when comparing it to its historical volatility, PayPal Holdings is 36.07 times less risky than SOUTHERN. It trades about 0.03 of its potential returns per unit of risk. SOUTHERN CALIFORNIA EDISON is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  6,956  in SOUTHERN CALIFORNIA EDISON on September 5, 2024 and sell it today you would lose (635.00) from holding SOUTHERN CALIFORNIA EDISON or give up 9.13% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy64.24%
ValuesDaily Returns

PayPal Holdings  vs.  SOUTHERN CALIFORNIA EDISON

 Performance 
       Timeline  
PayPal Holdings 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, PayPal Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.
SOUTHERN CALIFORNIA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days SOUTHERN CALIFORNIA EDISON has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for SOUTHERN CALIFORNIA EDISON investors.

PayPal Holdings and SOUTHERN Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PayPal Holdings and SOUTHERN

The main advantage of trading using opposite PayPal Holdings and SOUTHERN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, SOUTHERN 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 SOUTHERN will offset losses from the drop in SOUTHERN's long position.
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The idea behind PayPal Holdings and SOUTHERN CALIFORNIA EDISON 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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