Correlation Between Western Union and Charles Schwab
Can any of the company-specific risk be diversified away by investing in both Western Union and Charles Schwab 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 Charles Schwab 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 Charles Schwab Corp, you can compare the effects of market volatilities on Western Union and Charles Schwab 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 Charles Schwab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Union and Charles Schwab.
Diversification Opportunities for Western Union and Charles Schwab
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Western and Charles is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Western Union Co and Charles Schwab Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charles Schwab Corp 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 Charles Schwab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charles Schwab Corp has no effect on the direction of Western Union i.e., Western Union and Charles Schwab go up and down completely randomly.
Pair Corralation between Western Union and Charles Schwab
Allowing for the 90-day total investment horizon Western Union Co is expected to under-perform the Charles Schwab. But the stock apears to be less risky and, when comparing its historical volatility, Western Union Co is 1.41 times less risky than Charles Schwab. The stock trades about 0.0 of its potential returns per unit of risk. The Charles Schwab Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 7,735 in Charles Schwab Corp on August 30, 2024 and sell it today you would earn a total of 525.00 from holding Charles Schwab Corp or generate 6.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Union Co vs. Charles Schwab Corp
Performance |
| Timeline |
| Western Union |
| Charles Schwab Corp |
Western Union and Charles Schwab Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Union and Charles Schwab
The main advantage of trading using opposite Western Union and Charles Schwab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Union position performs unexpectedly, Charles Schwab 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 Charles Schwab will offset losses from the drop in Charles Schwab's long position.| Western Union vs. American Express | Western Union vs. PayPal Holdings | Western Union vs. Capital One Financial | Western Union vs. Upstart Holdings |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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