Correlation Between PRA and Western Union
Can any of the company-specific risk be diversified away by investing in both PRA and Western Union 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 PRA and Western Union into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PRA Group and Western Union Co, you can compare the effects of market volatilities on PRA and Western Union 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 PRA with a short position of Western Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of PRA and Western Union.
Diversification Opportunities for PRA and Western Union
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between PRA and Western is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding PRA Group and Western Union Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Union and PRA 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 PRA Group are associated (or correlated) with Western Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Union has no effect on the direction of PRA i.e., PRA and Western Union go up and down completely randomly.
Pair Corralation between PRA and Western Union
Given the investment horizon of 90 days PRA Group is expected to generate 2.53 times more return on investment than Western Union. However, PRA is 2.53 times more volatile than Western Union Co. It trades about 0.08 of its potential returns per unit of risk. Western Union Co is currently generating about 0.09 per unit of risk. If you would invest 2,290 in PRA Group on February 13, 2024 and sell it today you would earn a total of 356.00 from holding PRA Group or generate 15.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PRA Group vs. Western Union Co
Performance |
| Timeline |
| PRA Group |
| Western Union |
PRA and Western Union Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PRA and Western Union
The main advantage of trading using opposite PRA and Western Union positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PRA position performs unexpectedly, Western Union 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 Western Union will offset losses from the drop in Western Union's long position.The idea behind PRA Group and Western Union Co 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.| Western Union vs. Navient Corp | Western Union vs. Green Dot | Western Union vs. Orix Corp Ads | Western Union vs. FirstCash |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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