Correlation Between Western Union and TPG RE

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

Diversification Opportunities for Western Union and TPG RE

0.74

Correlation Coefficient

Western Union  TPG RE

Poor diversification

The 3 months correlation between Western and TPG is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Western Union Co and TPG RE Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPG RE Finance 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 TPG RE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPG RE Finance has no effect on the direction of Western Union i.e., Western Union and TPG RE go up and down completely randomly.

Pair Corralation between Western Union and TPG RE

Allowing for the 90-day total investment horizon Western Union Co is expected to generate 1.0 times more return on investment than TPG RE. However, Western Union is 1.0 times more volatile than TPG RE Finance. It trades about -0.04 of its potential returns per unit of risk. TPG RE Finance is currently generating about -0.07 per unit of risk. If you would invest  1,235  in Western Union Co on July 18, 2024 and sell it today you would lose (60.00) from holding Western Union Co or give up 4.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Western Union Co  vs.  TPG RE Finance

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 recent stock price uproar, may contribute to short-horizon losses for the private investors.

TPG RE Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TPG RE Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Western Union and TPG RE

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

The idea behind Western Union Co and TPG RE Finance 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.