Correlation Between Dow Jones and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Wells Fargo Advantage, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Wells Fargo.
Diversification Opportunities for Dow Jones and Wells Fargo
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and Wells is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial 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 Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Wells Fargo go up and down completely randomly.
Pair Corralation between Dow Jones and Wells Fargo
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.97 times more return on investment than Wells Fargo. However, Dow Jones is 1.97 times more volatile than Wells Fargo Advantage. It trades about 0.37 of its potential returns per unit of risk. Wells Fargo Advantage is currently generating about 0.35 per unit of risk. If you would invest 4,176,346 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 314,719 from holding Dow Jones Industrial or generate 7.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. Wells Fargo Advantage
Performance |
| Timeline |
Dow Jones and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Wells Fargo Advantage
Pair trading matchups for Wells Fargo
Pair Trading with Dow Jones and Wells Fargo
The main advantage of trading using opposite Dow Jones and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| Wells Fargo vs. Fidelity Managed Retirement | Wells Fargo vs. Strategic Allocation Moderate | Wells Fargo vs. Transamerica Cleartrack Retirement | Wells Fargo vs. Franklin Lifesmart Retirement |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
Other Complementary Tools
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios |