Correlation Between Western Union and Capital Southwest
Can any of the company-specific risk be diversified away by investing in both Western Union and Capital Southwest 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 Capital Southwest 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 Capital Southwest, you can compare the effects of market volatilities on Western Union and Capital Southwest 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 Capital Southwest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Union and Capital Southwest.
Diversification Opportunities for Western Union and Capital Southwest
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Western and Capital is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Western Union Co and Capital Southwest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Southwest 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 Capital Southwest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Southwest has no effect on the direction of Western Union i.e., Western Union and Capital Southwest go up and down completely randomly.
Pair Corralation between Western Union and Capital Southwest
Allowing for the 90-day total investment horizon Western Union Co is expected to under-perform the Capital Southwest. In addition to that, Western Union is 3.51 times more volatile than Capital Southwest. It trades about -0.14 of its total potential returns per unit of risk. Capital Southwest is currently generating about 0.11 per unit of volatility. If you would invest 2,539 in Capital Southwest on August 31, 2024 and sell it today you would earn a total of 41.00 from holding Capital Southwest or generate 1.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Union Co vs. Capital Southwest
Performance |
| Timeline |
| Western Union |
| Capital Southwest |
Western Union and Capital Southwest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Union and Capital Southwest
The main advantage of trading using opposite Western Union and Capital Southwest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Union position performs unexpectedly, Capital Southwest 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 Capital Southwest will offset losses from the drop in Capital Southwest's long position.| Western Union vs. Navient Corp | Western Union vs. Green Dot | Western Union vs. Orix Corp Ads | Western Union vs. FirstCash |
| Capital Southwest vs. Constellation Brands Class | Capital Southwest vs. Anheuser Busch Inbev | Capital Southwest vs. Meiwu Technology Co | Capital Southwest vs. Kaltura |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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