Correlation Between Western Union and Arbor Realty
Can any of the company-specific risk be diversified away by investing in both Western Union and Arbor Realty 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 Western Union and Arbor Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Union Co and Arbor Realty Trust, you can compare the effects of market volatilities on Western Union and Arbor Realty 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 Western Union with a short position of Arbor Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Union and Arbor Realty.
Diversification Opportunities for Western Union and Arbor Realty
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Western and Arbor is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Western Union Co and Arbor Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbor Realty Trust and Western Union 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 Western Union Co are associated (or correlated) with Arbor Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbor Realty Trust has no effect on the direction of Western Union i.e., Western Union and Arbor Realty go up and down completely randomly.
Pair Corralation between Western Union and Arbor Realty
Allowing for the 90-day total investment horizon Western Union Co is expected to under-perform the Arbor Realty. In addition to that, Western Union is 1.08 times more volatile than Arbor Realty Trust. It trades about -0.02 of its total potential returns per unit of risk. Arbor Realty Trust is currently generating about 0.01 per unit of volatility. If you would invest 1,476 in Arbor Realty Trust on August 28, 2024 and sell it today you would earn a total of 0.00 from holding Arbor Realty Trust or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Union Co vs. Arbor Realty Trust
Performance |
| Timeline |
| Western Union |
| Arbor Realty Trust |
Western Union and Arbor Realty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Union and Arbor Realty
The main advantage of trading using opposite Western Union and Arbor Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Union position performs unexpectedly, Arbor Realty 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 Arbor Realty will offset losses from the drop in Arbor Realty's long position.| Western Union vs. American Express | Western Union vs. Morningstar Unconstrained Allocation | Western Union vs. Sitka Gold Corp | Western Union vs. MSCI ACWI exAUCONSUMER |
| Arbor Realty vs. Blackstone Mortgage Trust | Arbor Realty vs. Omega Healthcare Investors | Arbor Realty vs. Medical Properties Trust |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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