Correlation Between Capital One and Western Union

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

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

Diversification Opportunities for Capital One and Western Union

-0.84

Correlation Coefficient

Capital One  Western Union

Pay attention - limited upside

The 3 months correlation between Capital and Western is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and The Western Union in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Union and Capital One 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 Capital One Financial 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 Capital One i.e., Capital One and Western Union go up and down completely randomly.

Pair Corralation between Capital One and Western Union

Assuming the 90 days trading horizon Capital One Financial is expected to under-perform the Western Union. In addition to that, Capital One is 2.34 times more volatile than The Western Union. It trades about -0.04 of its total potential returns per unit of risk. The Western Union is currently generating about 0.13 per unit of volatility. If you would invest  21,854  in The Western Union on December 27, 2024 and sell it today you would earn a total of  1,646  from holding The Western Union or generate 7.53% return on investment over 90 days.

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

Capital One Financial  vs.  The Western Union

Capital One Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capital One Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Capital One is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Western Union

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Western Union are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Western Union may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Capital One and Western Union

The main advantage of trading using opposite Capital One and Western Union positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One 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 Capital One Financial and The Western Union 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.