Correlation Between Western Union and T Rowe

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

Diversification Opportunities for Western Union and T Rowe

0.89

Correlation Coefficient

Western Union  T Rowe

Very poor diversification

The 3 months correlation between Western and TROW is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Western Union Co and T Rowe Price in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Rowe Price 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 T Rowe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Rowe Price has no effect on the direction of Western Union i.e., Western Union and T Rowe go up and down completely randomly.

Pair Corralation between Western Union and T Rowe

Allowing for the 90-day total investment horizon Western Union Co is expected to generate 0.94 times more return on investment than T Rowe. However, Western Union Co is 1.07 times less risky than T Rowe. It trades about 0.07 of its potential returns per unit of risk. T Rowe Price is currently generating about 0.02 per unit of risk. If you would invest  1,087  in Western Union Co on January 24, 2024 and sell it today you would earn a total of  243.00  from holding Western Union Co or generate 22.36% return on investment over 90 days.

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

Western Union Co  vs.  T Rowe Price

Western Union

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Western Union Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Western Union may actually be approaching a critical reversion point that can send shares even higher in May 2024.

T Rowe Price

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, T Rowe is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Western Union and T Rowe

The main advantage of trading using opposite Western Union and T Rowe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Union position performs unexpectedly, T Rowe 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 T Rowe will offset losses from the drop in T Rowe's long position.

The idea behind Western Union Co and T Rowe Price 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 Transaction History module to view history of all your transactions and understand their impact on performance.