Correlation Between Boot Barn and Western Union

Can any of the company-specific risk be diversified away by investing in both Boot Barn and Western Union 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 Boot Barn and Western Union into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Boot Barn Holdings and Western Union Co, you can compare the effects of market volatilities on Boot Barn and Western Union 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 Boot Barn with a short position of Western Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boot Barn and Western Union.

Diversification Opportunities for Boot Barn and Western Union

0.87

Correlation Coefficient

Boot Barn  Western Union

Very poor diversification

The 3 months correlation between Boot and Western is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Boot Barn Holdings and Western Union Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Union and Boot Barn 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 Boot Barn Holdings are associated (or correlated) with Western Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Union has no effect on the direction of Boot Barn i.e., Boot Barn and Western Union go up and down completely randomly.

Pair Corralation between Boot Barn and Western Union

Given the investment horizon of 90 days Boot Barn Holdings is expected to generate 1.88 times more return on investment than Western Union. However, Boot Barn is 1.88 times more volatile than Western Union Co. It trades about 0.15 of its potential returns per unit of risk. Western Union Co is currently generating about -0.04 per unit of risk. If you would invest  13,629  in Boot Barn Holdings on September 22, 2024 and sell it today you would earn a total of  1,146  from holding Boot Barn Holdings or generate 8.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Boot Barn Holdings  vs.  Western Union Co

Boot Barn Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boot Barn Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Western Union

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Union Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Boot Barn and Western Union

The main advantage of trading using opposite Boot Barn and Western Union positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boot Barn position performs unexpectedly, Western Union 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 Western Union will offset losses from the drop in Western Union's long position.

The idea behind Boot Barn Holdings and Western Union Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.