Correlation Between PayPal Holdings and EZCORP

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

Diversification Opportunities for PayPal Holdings and EZCORP

-0.52
  Correlation Coefficient

Excellent diversification

The 3 months correlation between PayPal and EZCORP is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and EZCORP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EZCORP Inc 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 EZCORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EZCORP Inc has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and EZCORP go up and down completely randomly.

Pair Corralation between PayPal Holdings and EZCORP

Given the investment horizon of 90 days PayPal Holdings is expected to generate 20.4 times less return on investment than EZCORP. In addition to that, PayPal Holdings is 1.88 times more volatile than EZCORP Inc. It trades about 0.01 of its total potential returns per unit of risk. EZCORP Inc is currently generating about 0.26 per unit of volatility. If you would invest  919.00  in EZCORP Inc on September 5, 2022 and sell it today you would earn a total of  98.00  from holding EZCORP Inc or generate 10.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

PayPal Holdings  vs.  EZCORP Inc

 Performance (%) 
       Timeline  
PayPal Holdings 
PayPal Performance
0 of 100
Over the last 90 days PayPal Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's basic indicators remain relatively steady which may send shares a bit higher in January 2023. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

PayPal Price Channel

EZCORP Inc 
EZCORP Performance
12 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in EZCORP Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, EZCORP showed solid returns over the last few months and may actually be approaching a breakup point.

EZCORP Price Channel

PayPal Holdings and EZCORP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PayPal Holdings and EZCORP

The main advantage of trading using opposite PayPal Holdings and EZCORP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, EZCORP 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 EZCORP will offset losses from the drop in EZCORP's long position.
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The idea behind PayPal Holdings and EZCORP Inc 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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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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