Correlation Between Analog Devices and Western Union
Can any of the company-specific risk be diversified away by investing in both Analog Devices 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 Analog Devices and Western Union into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Analog Devices and Western Union Co, you can compare the effects of market volatilities on Analog Devices 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 Analog Devices with a short position of Western Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Analog Devices and Western Union.
Diversification Opportunities for Analog Devices and Western Union
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Analog and Western is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and Western Union Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Union and Analog Devices 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 Analog Devices 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 Analog Devices i.e., Analog Devices and Western Union go up and down completely randomly.
Pair Corralation between Analog Devices and Western Union
Considering the 90-day investment horizon Analog Devices is expected to generate 1.47 times more return on investment than Western Union. However, Analog Devices is 1.47 times more volatile than Western Union Co. It trades about -0.01 of its potential returns per unit of risk. Western Union Co is currently generating about -0.08 per unit of risk. If you would invest 22,060 in Analog Devices on September 12, 2024 and sell it today you would lose (358.00) from holding Analog Devices or give up 1.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Analog Devices vs. Western Union Co
Performance |
| Timeline |
| Analog Devices |
| Western Union |
Analog Devices and Western Union Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Analog Devices and Western Union
The main advantage of trading using opposite Analog Devices and Western Union positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Analog Devices 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.| Analog Devices vs. ON Semiconductor | Analog Devices vs. Monolithic Power Systems | Analog Devices vs. Globalfoundries | Analog Devices vs. Wisekey International Holding |
| 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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