Correlation Between Pitney Bowes and PayPal Holdings

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

Diversification Opportunities for Pitney Bowes and PayPal Holdings

0.51
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Pitney and PayPal is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Pitney Bowes and PayPal Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PayPal Holdings and Pitney Bowes 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 Pitney Bowes 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 Pitney Bowes i.e., Pitney Bowes and PayPal Holdings go up and down completely randomly.

Pair Corralation between Pitney Bowes and PayPal Holdings

Considering the 90-day investment horizon Pitney Bowes is expected to generate 1.47 times more return on investment than PayPal Holdings. However, Pitney Bowes is 1.47 times more volatile than PayPal Holdings. It trades about 0.04 of its potential returns per unit of risk. PayPal Holdings is currently generating about -0.01 per unit of risk. If you would invest  362.00  in Pitney Bowes on December 29, 2023 and sell it today you would earn a total of  76.00  from holding Pitney Bowes or generate 20.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy99.6%
ValuesDaily Returns

Pitney Bowes  vs.  PayPal Holdings

 Performance 
       Timeline  
Pitney Bowes 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Pitney Bowes are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, Pitney Bowes is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.
PayPal Holdings 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, PayPal Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Pitney Bowes and PayPal Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pitney Bowes and PayPal Holdings

The main advantage of trading using opposite Pitney Bowes and PayPal Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pitney Bowes 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 Pitney Bowes 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.
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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