Correlation Between Eisai Co and PayPal Holdings

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

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

Diversification Opportunities for Eisai Co and PayPal Holdings

-0.18

Correlation Coefficient

Eisai Co  PayPal Holdings

Good diversification

The 3 months correlation between Eisai and PayPal is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Eisai Co and PayPal Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PayPal Holdings and Eisai Co 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 Eisai Co 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 Eisai Co i.e., Eisai Co and PayPal Holdings go up and down completely randomly.

Pair Corralation between Eisai Co and PayPal Holdings

Assuming the 90 days horizon Eisai Co is expected to under-perform the PayPal Holdings. In addition to that, Eisai Co is 1.41 times more volatile than PayPal Holdings. It trades about -0.03 of its total potential returns per unit of risk. PayPal Holdings is currently generating about 0.16 per unit of volatility. If you would invest  5,269  in PayPal Holdings on April 16, 2025 and sell it today you would earn a total of  1,065  from holding PayPal Holdings or generate 20.21% return on investment over 90 days.

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

Eisai Co  vs.  PayPal Holdings

Eisai Co

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eisai Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Eisai Co is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PayPal Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PayPal Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eisai Co and PayPal Holdings

The main advantage of trading using opposite Eisai Co and PayPal Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eisai Co 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 Eisai Co 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.