Correlation Between Stronghold Digital and Western Union

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

By analyzing existing cross correlation between Stronghold Digital Mining and Western Union Co, you can compare the effects of market volatilities on Stronghold Digital and Western Union 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 Stronghold Digital with a short position of Western Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stronghold Digital and Western Union.

Diversification Opportunities for Stronghold Digital and Western Union

-0.4

Correlation Coefficient

Stronghold Digital  Western Union

Very good diversification

The 3 months correlation between Stronghold and Western is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Stronghold Digital Mining and Western Union Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Union and Stronghold Digital 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 Stronghold Digital Mining are associated (or correlated) with Western Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Union has no effect on the direction of Stronghold Digital i.e., Stronghold Digital and Western Union go up and down completely randomly.

Pair Corralation between Stronghold Digital and Western Union

Given the investment horizon of 90 days Stronghold Digital Mining is expected to generate 7.45 times more return on investment than Western Union. However, Stronghold Digital is 7.45 times more volatile than Western Union Co. It trades about 0.01 of its potential returns per unit of risk. Western Union Co is currently generating about -0.06 per unit of risk. If you would invest  372.00  in Stronghold Digital Mining on February 3, 2024 and sell it today you would lose (36.00) from holding Stronghold Digital Mining or give up 9.68% of portfolio value over 90 days.

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

Stronghold Digital Mining  vs.  Western Union Co

Stronghold Digital Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stronghold Digital Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Western Union

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Western Union Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Western Union may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Stronghold Digital and Western Union

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

The idea behind Stronghold Digital Mining and Western Union Co 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.