Correlation Between Waste Management and PayPal Holdings
Can any of the company-specific risk be diversified away by investing in both Waste Management 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 Waste Management and PayPal Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and PayPal Holdings, you can compare the effects of market volatilities on Waste Management 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 Waste Management with a short position of PayPal Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and PayPal Holdings.
Diversification Opportunities for Waste Management and PayPal Holdings
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Waste and PayPal is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and PayPal Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PayPal Holdings and Waste Management 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 Waste Management 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 Waste Management i.e., Waste Management and PayPal Holdings go up and down completely randomly.
Pair Corralation between Waste Management and PayPal Holdings
Assuming the 90 days trading horizon Waste Management is expected to generate 1.42 times less return on investment than PayPal Holdings. But when comparing it to its historical volatility, Waste Management is 1.99 times less risky than PayPal Holdings. It trades about 0.4 of its potential returns per unit of risk. PayPal Holdings is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 2,249 in PayPal Holdings on September 5, 2024 and sell it today you would earn a total of 336.00 from holding PayPal Holdings or generate 14.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Waste Management vs. PayPal Holdings
Performance |
| Timeline |
| Waste Management |
| PayPal Holdings |
Waste Management and PayPal Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and PayPal Holdings
The main advantage of trading using opposite Waste Management and PayPal Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management 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.| Waste Management vs. Warner Music Group | Waste Management vs. Marvell Technology | Waste Management vs. Charter Communications | Waste Management vs. Tyson Foods |
| PayPal Holdings vs. Ameriprise Financial | PayPal Holdings vs. Apartment Investment and | PayPal Holdings vs. New Oriental Education | PayPal Holdings vs. Bread Financial Holdings |
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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