Correlation Between Western Union and SoFi Technologies
Can any of the company-specific risk be diversified away by investing in both Western Union and SoFi Technologies 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 SoFi Technologies 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 SoFi Technologies, you can compare the effects of market volatilities on Western Union and SoFi Technologies 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 SoFi Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Union and SoFi Technologies.
Diversification Opportunities for Western Union and SoFi Technologies
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Western and SoFi is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Western Union Co and SoFi Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoFi Technologies 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 SoFi Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoFi Technologies has no effect on the direction of Western Union i.e., Western Union and SoFi Technologies go up and down completely randomly.
Pair Corralation between Western Union and SoFi Technologies
Allowing for the 90-day total investment horizon Western Union Co is expected to under-perform the SoFi Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Western Union Co is 2.44 times less risky than SoFi Technologies. The stock trades about -0.01 of its potential returns per unit of risk. The SoFi Technologies is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 461.00 in SoFi Technologies on September 20, 2024 and sell it today you would earn a total of 1,205 from holding SoFi Technologies or generate 261.39% 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. SoFi Technologies
Performance |
| Timeline |
| Western Union |
| SoFi Technologies |
Western Union and SoFi Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Union and SoFi Technologies
The main advantage of trading using opposite Western Union and SoFi Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Union position performs unexpectedly, SoFi Technologies 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 SoFi Technologies will offset losses from the drop in SoFi Technologies' long position.| Western Union vs. SoFi Technologies | Western Union vs. Capital One Financial | Western Union vs. American Express |
| SoFi Technologies vs. Visa Class A | SoFi Technologies vs. PayPal Holdings | SoFi Technologies vs. Mastercard |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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