Correlation Between Western Union and NYSE Declining

Can any of the company-specific risk be diversified away by investing in both Western Union and NYSE Declining 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 Declining 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 Declining Stocks, you can compare the effects of market volatilities on Western Union and NYSE Declining 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 Declining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Union and NYSE Declining.

Diversification Opportunities for Western Union and NYSE Declining

-0.19

Correlation Coefficient

Western Union  NYSE Declining

Good diversification

The 3 months correlation between Western and NYSE is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Western Union Co and NYSE Declining Stocks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NYSE Declining Stocks 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 Declining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NYSE Declining Stocks has no effect on the direction of Western Union i.e., Western Union and NYSE Declining go up and down completely randomly.

Pair Corralation between Western Union and NYSE Declining

Allowing for the 90-day total investment horizon Western Union is expected to generate 1591.21 times less return on investment than NYSE Declining. But when comparing it to its historical volatility, Western Union Co is 49.78 times less risky than NYSE Declining. It trades about 0.01 of its potential returns per unit of risk. NYSE Declining Stocks is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  74,000  in NYSE Declining Stocks on September 19, 2024 and sell it today you would earn a total of  93,500  from holding NYSE Declining Stocks or generate 126.35% return on investment over 90 days.

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

Western Union Co  vs.  NYSE Declining Stocks

Pair Trading with Western Union and NYSE Declining

The main advantage of trading using opposite Western Union and NYSE Declining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Union position performs unexpectedly, NYSE Declining 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 Declining will offset losses from the drop in NYSE Declining's long position.

The idea behind Western Union Co and NYSE Declining Stocks 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.