Correlation Between Amazon and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both Amazon and Wells Fargo 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 Amazon and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Wells Fargo Disciplined, you can compare the effects of market volatilities on Amazon and Wells Fargo 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 Amazon with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Wells Fargo.
Diversification Opportunities for Amazon and Wells Fargo
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Amazon and Wells is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Wells Fargo Disciplined in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Disciplined and Amazon 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 Amazon Inc are associated (or correlated) with Wells Fargo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wells Fargo Disciplined has no effect on the direction of Amazon i.e., Amazon and Wells Fargo go up and down completely randomly.
Pair Corralation between Amazon and Wells Fargo
Given the investment horizon of 90 days Amazon Inc is expected to generate 2.1 times more return on investment than Wells Fargo. However, Amazon is 2.1 times more volatile than Wells Fargo Disciplined. It trades about 0.1 of its potential returns per unit of risk. Wells Fargo Disciplined is currently generating about 0.08 per unit of risk. If you would invest 9,158 in Amazon Inc on September 4, 2024 and sell it today you would earn a total of 11,913 from holding Amazon Inc or generate 130.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. Wells Fargo Disciplined
Performance |
| Timeline |
| Amazon Inc |
| Wells Fargo Disciplined |
Amazon and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Wells Fargo
The main advantage of trading using opposite Amazon and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Wells Fargo 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 Wells Fargo will offset losses from the drop in Wells Fargo's long position.The idea behind Amazon Inc and Wells Fargo Disciplined 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.| Wells Fargo vs. Wells Fargo Large | Wells Fargo vs. Loomis Sayles Growth | Wells Fargo vs. Invesco Disciplined Equity | Wells Fargo vs. Wells Fargo Large |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
Other Complementary Tools
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |