Correlation Between Western Union and Capital One

Can any of the company-specific risk be diversified away by investing in both Western Union and Capital One 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 Capital One 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 Capital One Financial, you can compare the effects of market volatilities on Western Union and Capital One 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 Capital One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Union and Capital One.

Diversification Opportunities for Western Union and Capital One

-0.01

Correlation Coefficient

Western Union  Capital One

Good diversification

The 3 months correlation between Western and Capital is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Western Union Co and Capital One Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital One Financial 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 Capital One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital One Financial has no effect on the direction of Western Union i.e., Western Union and Capital One go up and down completely randomly.

Pair Corralation between Western Union and Capital One

Allowing for the 90-day total investment horizon Western Union is expected to generate 1.13 times less return on investment than Capital One. But when comparing it to its historical volatility, Western Union Co is 1.01 times less risky than Capital One. It trades about 0.02 of its potential returns per unit of risk. Capital One Financial is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  19,072  in Capital One Financial on November 27, 2024 and sell it today you would earn a total of  279.00  from holding Capital One Financial or generate 1.46% return on investment over 90 days.

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

Western Union Co  vs.  Capital One Financial

Western Union

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Union Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Western Union is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Capital One Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Capital One is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Western Union and Capital One

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

The idea behind Western Union Co and Capital One Financial 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.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.