Correlation Between Regional Management and Western Union
Can any of the company-specific risk be diversified away by investing in both Regional Management 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 Regional Management and Western Union into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Regional Management Corp and Western Union Co, you can compare the effects of market volatilities on Regional Management 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 Regional Management with a short position of Western Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regional Management and Western Union.
Diversification Opportunities for Regional Management and Western Union
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Regional and Western is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Regional Management Corp and Western Union Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Union and Regional Management 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 Regional Management Corp 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 Regional Management i.e., Regional Management and Western Union go up and down completely randomly.
Pair Corralation between Regional Management and Western Union
Allowing for the 90-day total investment horizon Regional Management Corp is expected to generate 2.4 times more return on investment than Western Union. However, Regional Management is 2.4 times more volatile than Western Union Co. It trades about 0.1 of its potential returns per unit of risk. Western Union Co is currently generating about -0.03 per unit of risk. If you would invest 2,838 in Regional Management Corp on August 26, 2024 and sell it today you would earn a total of 165.00 from holding Regional Management Corp or generate 5.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Regional Management Corp vs. Western Union Co
Performance |
| Timeline |
| Regional Management Corp |
| Western Union |
Regional Management and Western Union Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Regional Management and Western Union
The main advantage of trading using opposite Regional Management and Western Union positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regional Management 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.| Regional Management vs. SLM Corp Pb | Regional Management vs. FirstCash | Regional Management vs. Navient Corp | Regional Management vs. Orix Corp Ads |
| Western Union vs. American Express | Western Union vs. Morningstar Unconstrained Allocation | Western Union vs. Sitka Gold Corp | Western Union vs. MSCI ACWI exAUCONSUMER |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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