Correlation Between Western Union and Visa

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

By analyzing existing cross correlation between The Western Union and Visa Inc, you can compare the effects of market volatilities on Western Union and Visa 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 Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Union and Visa.

Diversification Opportunities for Western Union and Visa

-0.49

Correlation Coefficient

Western Union  Visa

Very good diversification

The 3 months correlation between Western and Visa is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding The Western Union and Visa Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Inc 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 The Western Union are associated (or correlated) with Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Inc has no effect on the direction of Western Union i.e., Western Union and Visa go up and down completely randomly.

Pair Corralation between Western Union and Visa

Assuming the 90 days trading horizon The Western Union is expected to under-perform the Visa. But the stock apears to be less risky and, when comparing its historical volatility, The Western Union is 1.07 times less risky than Visa. The stock trades about -0.04 of its potential returns per unit of risk. The Visa Inc is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  7,938  in Visa Inc on September 3, 2024 and sell it today you would earn a total of  1,577  from holding Visa Inc or generate 19.87% return on investment over 90 days.

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

The Western Union  vs.  Visa Inc

Western Union

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Western Union has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Western Union is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Visa Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Visa sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Union and Visa

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

The idea behind The Western Union and Visa Inc 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..