Correlation Between Microsoft and Western Union
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Western Union into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Western Union Co, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Western Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Western Union.
Diversification Opportunities for Microsoft and Western Union
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Western is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Western Union Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Union and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Western Union go up and down completely randomly.
Pair Corralation between Microsoft and Western Union
Given the investment horizon of 90 days Microsoft is expected to under-perform the Western Union. In addition to that, Microsoft is 1.73 times more volatile than Western Union Co. It trades about -0.04 of its total potential returns per unit of risk. Western Union Co is currently generating about 0.08 per unit of volatility. If you would invest 1,084 in Western Union Co on August 30, 2024 and sell it today you would earn a total of 18.00 from holding Western Union Co or generate 1.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Western Union Co
Performance |
| Timeline |
| Microsoft |
| Western Union |
Microsoft and Western Union Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Western Union
The main advantage of trading using opposite Microsoft and Western Union positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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