Correlation Between Western Union and Stifel Financial
Can any of the company-specific risk be diversified away by investing in both Western Union and Stifel Financial 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 Western Union and Stifel Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Union Co and Stifel Financial, you can compare the effects of market volatilities on Western Union and Stifel Financial 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 Western Union with a short position of Stifel Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Union and Stifel Financial.
Diversification Opportunities for Western Union and Stifel Financial
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Stifel is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Western Union Co and Stifel Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stifel Financial and Western Union 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 Western Union Co are associated (or correlated) with Stifel Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stifel Financial has no effect on the direction of Western Union i.e., Western Union and Stifel Financial go up and down completely randomly.
Pair Corralation between Western Union and Stifel Financial
Allowing for the 90-day total investment horizon Western Union Co is expected to under-perform the Stifel Financial. In addition to that, Western Union is 1.07 times more volatile than Stifel Financial. It trades about -0.24 of its total potential returns per unit of risk. Stifel Financial is currently generating about -0.1 per unit of volatility. If you would invest 7,709 in Stifel Financial on January 21, 2024 and sell it today you would lose (178.00) from holding Stifel Financial or give up 2.31% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 95.45% |
Values | Daily Returns |
Western Union Co vs. Stifel Financial
Performance |
Timeline |
Western Union |
Stifel Financial |
Western Union and Stifel Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Western Union and Stifel Financial
The main advantage of trading using opposite Western Union and Stifel Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Union position performs unexpectedly, Stifel Financial 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 Stifel Financial will offset losses from the drop in Stifel Financial's long position.Western Union vs. Expedia Group | Western Union vs. Trip Group Ltd | Western Union vs. Booking Holdings | Western Union vs. Despegar Corp |
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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 the Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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