Correlation Between Western Union and NYSE Composite
Can any of the company-specific risk be diversified away by investing in both Western Union and NYSE Composite 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 NYSE Composite 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 NYSE Composite, you can compare the effects of market volatilities on Western Union and NYSE Composite 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 NYSE Composite. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Union and NYSE Composite.
Diversification Opportunities for Western Union and NYSE Composite
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Western and NYSE is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Western Union Co and NYSE Composite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NYSE Composite 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 NYSE Composite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NYSE Composite has no effect on the direction of Western Union i.e., Western Union and NYSE Composite go up and down completely randomly.
Pair Corralation between Western Union and NYSE Composite
Allowing for the 90-day total investment horizon Western Union Co is expected to generate 2.12 times more return on investment than NYSE Composite. However, Western Union is 2.12 times more volatile than NYSE Composite. It trades about -0.01 of its potential returns per unit of risk. NYSE Composite is currently generating about -0.06 per unit of risk. If you would invest 1,344 in Western Union Co on February 4, 2024 and sell it today you would lose (7.00) from holding Western Union Co or give up 0.52% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Western Union Co vs. NYSE Composite
Performance |
Timeline |
Western Union and NYSE Composite Volatility Contrast
Predicted Return Density |
Returns |
Western Union Co
Pair trading matchups for Western Union
NYSE Composite
Pair trading matchups for NYSE Composite
Pair Trading with Western Union and NYSE Composite
The main advantage of trading using opposite Western Union and NYSE Composite positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Union position performs unexpectedly, NYSE Composite 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 NYSE Composite will offset losses from the drop in NYSE Composite's long position.Western Union vs. Navient Corp | Western Union vs. Green Dot | Western Union vs. Orix Corp Ads | Western Union vs. FirstCash |
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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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