Correlation Between Western Union and Perceptive Capital

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

Diversification Opportunities for Western Union and Perceptive Capital

0.49

Correlation Coefficient

Western Union  Perceptive Capital

Very weak diversification

The 3 months correlation between Western and Perceptive is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Western Union Co and Perceptive Capital Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perceptive Capital 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 Perceptive Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perceptive Capital has no effect on the direction of Western Union i.e., Western Union and Perceptive Capital go up and down completely randomly.

Pair Corralation between Western Union and Perceptive Capital

Allowing for the 90-day total investment horizon Western Union Co is expected to generate 9.73 times more return on investment than Perceptive Capital. However, Western Union is 9.73 times more volatile than Perceptive Capital Solutions. It trades about 0.02 of its potential returns per unit of risk. Perceptive Capital Solutions is currently generating about 0.14 per unit of risk. If you would invest  1,034  in Western Union Co on December 30, 2024 and sell it today you would earn a total of  14.00  from holding Western Union Co or generate 1.35% return on investment over 90 days.

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

Western Union Co  vs.  Perceptive Capital Solutions

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.

Perceptive Capital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Perceptive Capital Solutions are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Perceptive Capital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Western Union and Perceptive Capital

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

The idea behind Western Union Co and Perceptive Capital Solutions 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.