Correlation Between PayPal Holdings and Waste Management
Can any of the company-specific risk be diversified away by investing in both PayPal Holdings and Waste Management 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 Waste Management into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PayPal Holdings and Waste Management, you can compare the effects of market volatilities on PayPal Holdings and Waste Management 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 Waste Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and Waste Management.
Diversification Opportunities for PayPal Holdings and Waste Management
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between PayPal and Waste is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management 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 Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Waste Management go up and down completely randomly.
Pair Corralation between PayPal Holdings and Waste Management
Given the investment horizon of 90 days PayPal Holdings is expected to generate 1.3 times less return on investment than Waste Management. In addition to that, PayPal Holdings is 1.95 times more volatile than Waste Management. It trades about 0.03 of its total potential returns per unit of risk. Waste Management is currently generating about 0.07 per unit of volatility. If you would invest 15,297 in Waste Management on September 3, 2024 and sell it today you would earn a total of 6,368 from holding Waste Management or generate 41.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.02% |
| Values | Daily Returns |
PayPal Holdings vs. Waste Management
Performance |
| Timeline |
| PayPal Holdings |
| Waste Management |
PayPal Holdings and Waste Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PayPal Holdings and Waste Management
The main advantage of trading using opposite PayPal Holdings and Waste Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, Waste Management 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 Waste Management will offset losses from the drop in Waste Management's long position.| PayPal Holdings vs. American Express | PayPal Holdings vs. Capital One Financial | PayPal Holdings vs. Upstart Holdings | PayPal Holdings vs. Ally Financial |
| Waste Management vs. TOTAL GABON | Waste Management vs. Walgreens Boots Alliance | Waste Management vs. Peak Resources Limited |
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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