Correlation Between Sector 10 and Western Union
Can any of the company-specific risk be diversified away by investing in both Sector 10 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 Sector 10 and Western Union into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sector 10 and Western Union Co, you can compare the effects of market volatilities on Sector 10 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 Sector 10 with a short position of Western Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sector 10 and Western Union.
Diversification Opportunities for Sector 10 and Western Union
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Sector and Western is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Sector 10 and Western Union Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Union and Sector 10 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 Sector 10 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 Sector 10 i.e., Sector 10 and Western Union go up and down completely randomly.
Pair Corralation between Sector 10 and Western Union
Given the investment horizon of 90 days Sector 10 is expected to generate 30.87 times more return on investment than Western Union. However, Sector 10 is 30.87 times more volatile than Western Union Co. It trades about 0.04 of its potential returns per unit of risk. Western Union Co is currently generating about 0.0 per unit of risk. If you would invest 1.29 in Sector 10 on January 25, 2024 and sell it today you would lose (1.28) from holding Sector 10 or give up 99.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 81.76% |
| Values | Daily Returns |
Sector 10 vs. Western Union Co
Performance |
| Timeline |
| Sector 10 |
| Western Union |
Sector 10 and Western Union Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sector 10 and Western Union
The main advantage of trading using opposite Sector 10 and Western Union positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sector 10 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 Sector 10 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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