Correlation Between PayPal Holdings and American Express

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

Diversification Opportunities for PayPal Holdings and American Express

0.32
  Correlation Coefficient

Weak diversification

The 3 months correlation between PayPal and American is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express 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 American Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Express has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and American Express go up and down completely randomly.

Pair Corralation between PayPal Holdings and American Express

Given the investment horizon of 90 days PayPal Holdings is expected to under-perform the American Express. In addition to that, PayPal Holdings is 1.61 times more volatile than American Express. It trades about -0.06 of its total potential returns per unit of risk. American Express is currently generating about 0.16 per unit of volatility. If you would invest  14,708  in American Express on September 2, 2022 and sell it today you would earn a total of  1,051  from holding American Express or generate 7.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

PayPal Holdings  vs.  American Express

 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 latest sluggish performance, the Stock's basic indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

PayPal Price Channel

American Express 
American Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, American Express may actually be approaching a critical reversion point that can send shares even higher in January 2023.

American Price Channel

PayPal Holdings and American Express Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PayPal Holdings and American Express

The main advantage of trading using opposite PayPal Holdings and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, American Express 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 American Express will offset losses from the drop in American Express' long position.
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The idea behind PayPal Holdings and American Express 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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