Correlation Between Western Union and Trinity Capital

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

Diversification Opportunities for Western Union and Trinity Capital

-0.41

Correlation Coefficient

Western Union  Trinity Capital

Very good diversification

The 3 months correlation between Western and Trinity is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Western Union Co and Trinity Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trinity 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 Trinity Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trinity Capital has no effect on the direction of Western Union i.e., Western Union and Trinity Capital go up and down completely randomly.

Pair Corralation between Western Union and Trinity Capital

Allowing for the 90-day total investment horizon Western Union Co is expected to under-perform the Trinity Capital. In addition to that, Western Union is 1.1 times more volatile than Trinity Capital. It trades about -0.06 of its total potential returns per unit of risk. Trinity Capital is currently generating about 0.06 per unit of volatility. If you would invest  1,364  in Trinity Capital on August 20, 2024 and sell it today you would earn a total of  55.00  from holding Trinity Capital or generate 4.03% return on investment over 90 days.

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

Western Union Co  vs.  Trinity Capital

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 comparatively stable basic indicators, Western Union is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Trinity Capital

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Trinity Capital are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Trinity Capital is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Western Union and Trinity Capital

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

The idea behind Western Union Co and Trinity Capital 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.