Correlation Between Basic Materials and Western Union
Can any of the company-specific risk be diversified away by investing in both Basic Materials 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 Basic Materials and Western Union into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and The Western Union, you can compare the effects of market volatilities on Basic Materials 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 Basic Materials with a short position of Western Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Western Union.
Diversification Opportunities for Basic Materials and Western Union
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Basic and Western is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and The Western Union in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Union and Basic Materials 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 Basic Materials 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 Basic Materials i.e., Basic Materials and Western Union go up and down completely randomly.
Pair Corralation between Basic Materials and Western Union
Assuming the 90 days trading horizon Basic Materials is expected to under-perform the Western Union. But the index apears to be less risky and, when comparing its historical volatility, Basic Materials is 2.17 times less risky than Western Union. The index trades about 0.0 of its potential returns per unit of risk. The The Western Union is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4,990 in The Western Union on November 19, 2024 and sell it today you would earn a total of 970.00 from holding The Western Union or generate 19.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 49.39% |
| Values | Daily Returns |
Basic Materials vs. The Western Union
Performance |
| Timeline |
Basic Materials and Western Union Volatility Contrast
Predicted Return Density |
| Returns |
Basic Materials
Pair trading matchups for Basic Materials
The Western Union
Pair trading matchups for Western Union
Pair Trading with Basic Materials and Western Union
The main advantage of trading using opposite Basic Materials and Western Union positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials 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.| Basic Materials vs. DXC Technology | Basic Materials vs. Charter Communications | Basic Materials vs. Take Two Interactive Software | Basic Materials vs. Verizon Communications |
| Western Union vs. Check Point Software | Western Union vs. Palantir Technologies | Western Union vs. Spotify Technology SA | Western Union vs. Unity Software |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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