Correlation Between Trimble and PayPal Holdings

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

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

Diversification Opportunities for Trimble and PayPal Holdings

0.13

Correlation Coefficient

Trimble  PayPal Holdings

Average diversification

The 3 months correlation between Trimble and PayPal is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Trimble and PayPal Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PayPal Holdings and Trimble 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 Trimble 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 Trimble i.e., Trimble and PayPal Holdings go up and down completely randomly.

Pair Corralation between Trimble and PayPal Holdings

Given the investment horizon of 90 days Trimble is expected to under-perform the PayPal Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Trimble is 1.05 times less risky than PayPal Holdings. The stock trades about -0.19 of its potential returns per unit of risk. The PayPal Holdings is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  6,600  in PayPal Holdings on January 25, 2024 and sell it today you would lose (157.00) from holding PayPal Holdings or give up 2.38% of portfolio value over 90 days.

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

Trimble  vs.  PayPal Holdings

Trimble

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trimble are ranked lower than 12 (%) 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.

PayPal Holdings

Risk-Adjusted Performance

4 of 100

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 uncertain basic indicators, PayPal Holdings may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Trimble and PayPal Holdings

The main advantage of trading using opposite Trimble and PayPal Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trimble 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 Trimble 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.

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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.