Correlation Between Financiera Independencia and Western Union

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

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

Diversification Opportunities for Financiera Independencia and Western Union

0.8

Correlation Coefficient

Financiera Independencia  Western Union

Very poor diversification

The 3 months correlation between Financiera and Western is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Financiera Independencia SAB and The Western Union in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Union and Financiera Independencia 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 Financiera Independencia SAB 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 Financiera Independencia i.e., Financiera Independencia and Western Union go up and down completely randomly.

Pair Corralation between Financiera Independencia and Western Union

Assuming the 90 days trading horizon Financiera Independencia SAB is expected to under-perform the Western Union. In addition to that, Financiera Independencia is 1.12 times more volatile than The Western Union. It trades about -0.17 of its total potential returns per unit of risk. The Western Union is currently generating about -0.11 per unit of volatility. If you would invest  23,683  in The Western Union on October 12, 2024 and sell it today you would lose (1,983) from holding The Western Union or give up 8.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Financiera Independencia SAB  vs.  The Western Union

Financiera Independencia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Financiera Independencia SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Western Union

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Western Union has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Financiera Independencia and Western Union

The main advantage of trading using opposite Financiera Independencia and Western Union positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financiera Independencia 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 Financiera Independencia SAB 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.