Correlation Between PayPal Holdings and Automatic Data
Can any of the company-specific risk be diversified away by investing in both PayPal Holdings and Automatic Data 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 Automatic Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PayPal Holdings and Automatic Data Processing, you can compare the effects of market volatilities on PayPal Holdings and Automatic Data 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 Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and Automatic Data.
Diversification Opportunities for PayPal Holdings and Automatic Data
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between PayPal and Automatic is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Automatic Data Processing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Data Processing 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 Automatic Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Data Processing has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Automatic Data go up and down completely randomly.
Pair Corralation between PayPal Holdings and Automatic Data
Assuming the 90 days trading horizon PayPal Holdings is expected to generate 1.57 times more return on investment than Automatic Data. However, PayPal Holdings is 1.57 times more volatile than Automatic Data Processing. It trades about 0.15 of its potential returns per unit of risk. Automatic Data Processing is currently generating about 0.19 per unit of risk. If you would invest 1,752 in PayPal Holdings on September 4, 2024 and sell it today you would earn a total of 833.00 from holding PayPal Holdings or generate 47.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 96.85% |
| Values | Daily Returns |
PayPal Holdings vs. Automatic Data Processing
Performance |
| Timeline |
| PayPal Holdings |
| Automatic Data Processing |
PayPal Holdings and Automatic Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PayPal Holdings and Automatic Data
The main advantage of trading using opposite PayPal Holdings and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, Automatic Data 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 Automatic Data will offset losses from the drop in Automatic Data's long position.| PayPal Holdings vs. Automatic Data Processing | PayPal Holdings vs. Extra Space Storage | PayPal Holdings vs. Waste Management | PayPal Holdings vs. Paycom Software |
| Automatic Data vs. Zoom Video Communications | Automatic Data vs. United Rentals | Automatic Data vs. Charter Communications | Automatic Data vs. Verizon Communications |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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