Correlation Between PayPal Holdings and Green Dot

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

Diversification Opportunities for PayPal Holdings and Green Dot

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between PayPal and Green is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Green Dot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Dot 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 Green Dot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Dot has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and Green Dot go up and down completely randomly.

Pair Corralation between PayPal Holdings and Green Dot

Given the investment horizon of 90 days PayPal Holdings is expected to generate 1.14 times more return on investment than Green Dot. However, PayPal Holdings is 1.14 times more volatile than Green Dot. It trades about -0.05 of its potential returns per unit of risk. Green Dot is currently generating about -0.06 per unit of risk. If you would invest  21,406  in PayPal Holdings on September 2, 2022 and sell it today you would lose (13,565)  from holding PayPal Holdings or give up 63.37% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.8%
ValuesDaily Returns

PayPal Holdings  vs.  Green Dot

 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

Green Dot 
Green Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Green Dot are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Green Dot is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Green Price Channel

PayPal Holdings and Green Dot Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PayPal Holdings and Green Dot

The main advantage of trading using opposite PayPal Holdings and Green Dot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, Green Dot 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 Green Dot will offset losses from the drop in Green Dot's long position.
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The idea behind PayPal Holdings and Green Dot 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

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