Correlation Between Western Union and Seven Hills

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

Diversification Opportunities for Western Union and Seven Hills

0.68

Correlation Coefficient

Western Union  Seven Hills

Poor diversification

The 3 months correlation between Western and Seven is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Western Union Co and Seven Hills Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seven Hills Realty 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 Seven Hills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seven Hills Realty has no effect on the direction of Western Union i.e., Western Union and Seven Hills go up and down completely randomly.

Pair Corralation between Western Union and Seven Hills

Allowing for the 90-day total investment horizon Western Union is expected to generate 1.57 times less return on investment than Seven Hills. In addition to that, Western Union is 1.15 times more volatile than Seven Hills Realty. It trades about 0.14 of its total potential returns per unit of risk. Seven Hills Realty is currently generating about 0.25 per unit of volatility. If you would invest  1,289  in Seven Hills Realty on September 15, 2024 and sell it today you would earn a total of  65.00  from holding Seven Hills Realty or generate 5.04% return on investment over 90 days.

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

Western Union Co  vs.  Seven Hills Realty

Western Union

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Union Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Seven Hills Realty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seven Hills Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Seven Hills is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Western Union and Seven Hills

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

The idea behind Western Union Co and Seven Hills Realty 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.