Correlation Between PayPal Holdings and Trimble

Can any of the company-specific risk be diversified away by investing in both PayPal Holdings and Trimble 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 Trimble into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PayPal Holdings and Trimble, you can compare the effects of market volatilities on PayPal Holdings and Trimble 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 Trimble. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and Trimble.

Diversification Opportunities for PayPal Holdings and Trimble

0.18

Correlation Coefficient

PayPal Holdings  Trimble

Average diversification

The 3 months correlation between PayPal and Trimble is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Trimble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trimble 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 Trimble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trimble has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Trimble go up and down completely randomly.

Pair Corralation between PayPal Holdings and Trimble

Given the investment horizon of 90 days PayPal Holdings is expected to under-perform the Trimble. In addition to that, PayPal Holdings is 1.21 times more volatile than Trimble. It trades about -0.02 of its total potential returns per unit of risk. Trimble is currently generating about 0.0 per unit of volatility. If you would invest  6,722  in Trimble on January 20, 2024 and sell it today you would lose (925.00) from holding Trimble or give up 13.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

PayPal Holdings  vs.  Trimble

PayPal Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PayPal Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, PayPal Holdings is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Trimble

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trimble are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady primary indicators, Trimble sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PayPal Holdings and Trimble

The main advantage of trading using opposite PayPal Holdings and Trimble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, Trimble 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 Trimble will offset losses from the drop in Trimble's long position.

The idea behind PayPal Holdings and Trimble 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.