Correlation Between Western Union and ALLTEL

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Can any of the company-specific risk be diversified away by investing in both Western Union and ALLTEL 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 ALLTEL 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 ALLTEL P 7875, you can compare the effects of market volatilities on Western Union and ALLTEL 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 ALLTEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Union and ALLTEL.

Diversification Opportunities for Western Union and ALLTEL

0.05
  Correlation Coefficient

Significant diversification

The 3 months correlation between Western and ALLTEL is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Western Union Co and ALLTEL P 7875 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALLTEL P 7875 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 ALLTEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALLTEL P 7875 has no effect on the direction of Western Union i.e., Western Union and ALLTEL go up and down completely randomly.

Pair Corralation between Western Union and ALLTEL

Allowing for the 90-day total investment horizon Western Union Co is expected to generate 0.44 times more return on investment than ALLTEL. However, Western Union Co is 2.29 times less risky than ALLTEL. It trades about -0.06 of its potential returns per unit of risk. ALLTEL P 7875 is currently generating about -0.04 per unit of risk. If you would invest  1,052  in Western Union Co on October 22, 2024 and sell it today you would lose (9.00) from holding Western Union Co or give up 0.86% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy72.22%
ValuesDaily Returns

Western Union Co  vs.  ALLTEL P 7875

 Performance 
       Timeline  
Western Union 

Risk-Adjusted Performance

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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.
ALLTEL P 7875 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days ALLTEL P 7875 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ALLTEL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Western Union and ALLTEL Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Western Union and ALLTEL

The main advantage of trading using opposite Western Union and ALLTEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Union position performs unexpectedly, ALLTEL 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 ALLTEL will offset losses from the drop in ALLTEL's long position.
The idea behind Western Union Co and ALLTEL P 7875 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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