Correlation Between Onemain Holdings and Paypal Holdings

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

Diversification Opportunities for Onemain Holdings and Paypal Holdings

-0.12
  Correlation Coefficient

Good diversification

The 3 months correlation between Onemain and Paypal is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Onemain Holdings and Paypal Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paypal Holdings and Onemain 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 Onemain Holdings 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 Onemain Holdings i.e., Onemain Holdings and Paypal Holdings go up and down completely randomly.

Pair Corralation between Onemain Holdings and Paypal Holdings

Considering the 90-day investment horizon Onemain Holdings is expected to generate 0.82 times more return on investment than Paypal Holdings. However, Onemain Holdings is 1.22 times less risky than Paypal Holdings. It trades about 0.03 of its potential returns per unit of risk. Paypal Holdings is currently generating about -0.05 per unit of risk. If you would invest  3,132  in Onemain Holdings on August 31, 2022 and sell it today you would earn a total of  647.00  from holding Onemain Holdings or generate 20.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Onemain Holdings  vs.  Paypal Holdings

 Performance (%) 
       Timeline  
Onemain Holdings 
Onemain Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Onemain Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Onemain Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Onemain Price Channel

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 unfluctuating performance in the last few months, the Stock's basic indicators remain relatively steady which may send shares a bit higher in December 2022. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Paypal Price Channel

Onemain Holdings and Paypal Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Onemain Holdings and Paypal Holdings

The main advantage of trading using opposite Onemain Holdings and Paypal Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Onemain Holdings 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.
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The idea behind Onemain Holdings 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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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 Watchlist Optimization module to optimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm.

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