Correlation Between American Express and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both American Express 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 American Express and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Wells Fargo Advantage, you can compare the effects of market volatilities on American Express 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 American Express with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Wells Fargo.
Diversification Opportunities for American Express and Wells Fargo
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Wells is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Wells Fargo Advantage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Advantage and American Express 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 American Express 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 Advantage has no effect on the direction of American Express i.e., American Express and Wells Fargo go up and down completely randomly.
Pair Corralation between American Express and Wells Fargo
If you would invest 23,338 in American Express on September 3, 2024 and sell it today you would earn a total of 7,130 from holding American Express or generate 30.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 0.8% |
| Values | Daily Returns |
American Express vs. Wells Fargo Advantage
Performance |
| Timeline |
| American Express |
| Wells Fargo Advantage |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
American Express and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Wells Fargo
The main advantage of trading using opposite American Express and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express 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.| American Express vs. Highway Holdings Limited | American Express vs. QCR Holdings | American Express vs. Partner Communications | American Express vs. Acumen Pharmaceuticals |
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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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