Correlation Between Visa and Western Union
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Western Union into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Inc and The Western Union, you can compare the effects of market volatilities on Visa 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 Visa with a short position of Western Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Western Union.
Diversification Opportunities for Visa and Western Union
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Visa and Western is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Visa Inc and The Western Union in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Union and Visa 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 Visa Inc 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 Visa i.e., Visa and Western Union go up and down completely randomly.
Pair Corralation between Visa and Western Union
Assuming the 90 days trading horizon Visa Inc is expected to generate 0.46 times more return on investment than Western Union. However, Visa Inc is 2.19 times less risky than Western Union. It trades about 0.11 of its potential returns per unit of risk. The Western Union is currently generating about 0.04 per unit of risk. If you would invest 7,036 in Visa Inc on October 12, 2024 and sell it today you would earn a total of 2,299 from holding Visa Inc or generate 32.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 87.17% |
| Values | Daily Returns |
Visa Inc vs. The Western Union
Performance |
| Timeline |
| Visa Inc |
| Western Union |
Visa and Western Union Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Western Union
The main advantage of trading using opposite Visa and Western Union positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. Telecomunicaes Brasileiras SA | Visa vs. Verizon Communications | Visa vs. Hormel Foods | Visa vs. Burlington Stores, |
| Western Union vs. Take Two Interactive Software | Western Union vs. Cognizant Technology Solutions | Western Union vs. Marvell Technology | Western Union vs. Micron Technology |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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