Correlation Between Western Union and Cebu Air
Can any of the company-specific risk be diversified away by investing in both Western Union and Cebu Air 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 Cebu Air 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 Cebu Air ADR, you can compare the effects of market volatilities on Western Union and Cebu Air 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 Cebu Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Union and Cebu Air.
Diversification Opportunities for Western Union and Cebu Air
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Cebu is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Western Union Co and Cebu Air ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cebu Air ADR 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 Cebu Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cebu Air ADR has no effect on the direction of Western Union i.e., Western Union and Cebu Air go up and down completely randomly.
Pair Corralation between Western Union and Cebu Air
Allowing for the 90-day total investment horizon Western Union Co is expected to generate 0.3 times more return on investment than Cebu Air. However, Western Union Co is 3.33 times less risky than Cebu Air. It trades about 0.01 of its potential returns per unit of risk. Cebu Air ADR is currently generating about -0.03 per unit of risk. If you would invest 1,096 in Western Union Co on September 2, 2024 and sell it today you would earn a total of 5.00 from holding Western Union Co or generate 0.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Western Union Co vs. Cebu Air ADR
Performance |
| Timeline |
| Western Union |
| Cebu Air ADR |
Western Union and Cebu Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Union and Cebu Air
The main advantage of trading using opposite Western Union and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Union position performs unexpectedly, Cebu Air 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 Cebu Air will offset losses from the drop in Cebu Air's long position.| Western Union vs. Navient Corp | Western Union vs. Green Dot | Western Union vs. Orix Corp Ads | Western Union vs. FirstCash |
| Cebu Air vs. Fidus Investment Corp | Cebu Air vs. 51Talk Online Education | Cebu Air vs. Nexstar Broadcasting Group | Cebu Air vs. Evolution Gaming Group |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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