Correlation Between SOUTHERN and PayPal Holdings

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

Diversification Opportunities for SOUTHERN and PayPal Holdings

0.02
  Correlation Coefficient

Significant diversification

The 3 months correlation between SOUTHERN and PayPal is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding SOUTHERN CALIF GAS and PayPal Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PayPal Holdings and SOUTHERN 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 SOUTHERN CALIF GAS are associated (or correlated) with PayPal Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PayPal Holdings has no effect on the direction of SOUTHERN i.e., SOUTHERN and PayPal Holdings go up and down completely randomly.

Pair Corralation between SOUTHERN and PayPal Holdings

Assuming the 90 days trading horizon SOUTHERN CALIF GAS is expected to generate 59.93 times more return on investment than PayPal Holdings. However, SOUTHERN is 59.93 times more volatile than PayPal Holdings. It trades about 0.12 of its potential returns per unit of risk. PayPal Holdings is currently generating about 0.03 per unit of risk. If you would invest  7,974  in SOUTHERN CALIF GAS on September 12, 2024 and sell it today you would earn a total of  602.00  from holding SOUTHERN CALIF GAS or generate 7.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy56.97%
ValuesDaily Returns

SOUTHERN CALIF GAS  vs.  PayPal Holdings

 Performance 
       Timeline  
SOUTHERN CALIF GAS 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 16 (%) 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.

SOUTHERN and PayPal Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SOUTHERN and PayPal Holdings

The main advantage of trading using opposite SOUTHERN and PayPal Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SOUTHERN position performs unexpectedly, PayPal 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 PayPal Holdings will offset losses from the drop in PayPal Holdings' long position.
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The idea behind SOUTHERN CALIF GAS and PayPal Holdings 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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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.

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