Correlation Between Western Union and Masco

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

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

Diversification Opportunities for Western Union and Masco

0.21

Correlation Coefficient

Western Union  Masco

Modest diversification

The 3 months correlation between Western and Masco is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding The Western Union and Masco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masco 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 The Western Union are associated (or correlated) with Masco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masco has no effect on the direction of Western Union i.e., Western Union and Masco go up and down completely randomly.

Pair Corralation between Western Union and Masco

Assuming the 90 days horizon Western Union is expected to generate 3.55 times less return on investment than Masco. But when comparing it to its historical volatility, The Western Union is 4.41 times less risky than Masco. It trades about 0.16 of its potential returns per unit of risk. Masco is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  114,362  in Masco on December 20, 2024 and sell it today you would earn a total of  41,548  from holding Masco or generate 36.33% return on investment over 90 days.

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

The Western Union  vs.  Masco

Western Union

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Western Union are ranked lower than 12 (%) 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.

Masco

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Masco are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Masco showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Union and Masco

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

The idea behind The Western Union and Masco 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.