Correlation Between IShares Trust and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both IShares Trust 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 IShares Trust and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Trust and Wells Fargo, you can compare the effects of market volatilities on IShares Trust 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 IShares Trust with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and Wells Fargo.
Diversification Opportunities for IShares Trust and Wells Fargo
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Wells is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Wells Fargo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo and IShares Trust 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 iShares Trust 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 has no effect on the direction of IShares Trust i.e., IShares Trust and Wells Fargo go up and down completely randomly.
Pair Corralation between IShares Trust and Wells Fargo
Assuming the 90 days trading horizon IShares Trust is expected to generate 4.8 times less return on investment than Wells Fargo. But when comparing it to its historical volatility, iShares Trust is 1.99 times less risky than Wells Fargo. It trades about 0.08 of its potential returns per unit of risk. Wells Fargo is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 9,083 in Wells Fargo on September 19, 2024 and sell it today you would earn a total of 1,742 from holding Wells Fargo or generate 19.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 97.56% |
| Values | Daily Returns |
iShares Trust vs. Wells Fargo
Performance |
| Timeline |
| iShares Trust |
| Wells Fargo |
IShares Trust and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Trust and Wells Fargo
The main advantage of trading using opposite IShares Trust and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust 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.| IShares Trust vs. Energisa SA | IShares Trust vs. BTG Pactual Logstica | IShares Trust vs. Plano Plano Desenvolvimento | IShares Trust vs. Companhia Habitasul de |
| Wells Fargo vs. HSBC Holdings plc | Wells Fargo vs. Barclays PLC | Wells Fargo vs. BTG Pactual Logstica | Wells Fargo vs. Plano Plano Desenvolvimento |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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