Correlation Between PRA and PayPal Holdings
Can any of the company-specific risk be diversified away by investing in both PRA 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 PRA and PayPal Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PRA Group and PayPal Holdings, you can compare the effects of market volatilities on PRA 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 PRA with a short position of PayPal Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of PRA and PayPal Holdings.
Diversification Opportunities for PRA and PayPal Holdings
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between PRA and PayPal is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding PRA Group and PayPal Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PayPal Holdings and PRA 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 PRA Group 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 PRA i.e., PRA and PayPal Holdings go up and down completely randomly.
Pair Corralation between PRA and PayPal Holdings
Given the investment horizon of 90 days PRA Group is expected to under-perform the PayPal Holdings. In addition to that, PRA is 2.37 times more volatile than PayPal Holdings. It trades about -0.09 of its total potential returns per unit of risk. PayPal Holdings is currently generating about -0.16 per unit of volatility. If you would invest 6,600 in PayPal Holdings on January 24, 2024 and sell it today you would lose (281.00) from holding PayPal Holdings or give up 4.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PRA Group vs. PayPal Holdings
Performance |
| Timeline |
| PRA Group |
| PayPal Holdings |
PRA and PayPal Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PRA and PayPal Holdings
The main advantage of trading using opposite PRA and PayPal Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PRA 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.The idea behind PRA Group 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.| PayPal Holdings vs. American Express | PayPal Holdings vs. Capital One Financial | PayPal Holdings vs. Upstart HoldingsInc | PayPal Holdings vs. Ally Financial |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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