Correlation Between Western Union and AG Mortgage
Can any of the company-specific risk be diversified away by investing in both Western Union and AG Mortgage 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 AG Mortgage 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 AG Mortgage Investment, you can compare the effects of market volatilities on Western Union and AG Mortgage 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 AG Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Union and AG Mortgage.
Diversification Opportunities for Western Union and AG Mortgage
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and MITT is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Western Union Co and AG Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AG Mortgage Investment 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 AG Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AG Mortgage Investment has no effect on the direction of Western Union i.e., Western Union and AG Mortgage go up and down completely randomly.
Pair Corralation between Western Union and AG Mortgage
Allowing for the 90-day total investment horizon Western Union Co is expected to generate 0.45 times more return on investment than AG Mortgage. However, Western Union Co is 2.21 times less risky than AG Mortgage. It trades about -0.13 of its potential returns per unit of risk. AG Mortgage Investment is currently generating about -0.17 per unit of risk. If you would invest 1,052 in Western Union Co on October 24, 2024 and sell it today you would lose (22.00) from holding Western Union Co or give up 2.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Western Union Co vs. AG Mortgage Investment
Performance |
| Timeline |
| Western Union |
| AG Mortgage Investment |
Western Union and AG Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Union and AG Mortgage
The main advantage of trading using opposite Western Union and AG Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Union position performs unexpectedly, AG Mortgage 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 AG Mortgage will offset losses from the drop in AG Mortgage's long position.| Western Union vs. Navient Corp | Western Union vs. Green Dot | Western Union vs. Orix Corp Ads | Western Union vs. FirstCash |
| AG Mortgage vs. New York Mortgage | AG Mortgage vs. Ellington Residential Mortgage | AG Mortgage vs. Invesco Mortgage Capital | AG Mortgage vs. TPG RE Finance |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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