Correlation Between Wells Fargo and First Eagle
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and First Eagle 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 Wells Fargo and First Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo Diversified and First Eagle Gold, you can compare the effects of market volatilities on Wells Fargo and First Eagle 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 Wells Fargo with a short position of First Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and First Eagle.
Diversification Opportunities for Wells Fargo and First Eagle
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Wells and First is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Diversified and First Eagle Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Eagle Gold and Wells Fargo 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 Wells Fargo Diversified are associated (or correlated) with First Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Eagle Gold has no effect on the direction of Wells Fargo i.e., Wells Fargo and First Eagle go up and down completely randomly.
Pair Corralation between Wells Fargo and First Eagle
Assuming the 90 days horizon Wells Fargo is expected to generate 1.47 times less return on investment than First Eagle. But when comparing it to its historical volatility, Wells Fargo Diversified is 1.65 times less risky than First Eagle. It trades about 0.36 of its potential returns per unit of risk. First Eagle Gold is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 2,662 in First Eagle Gold on October 25, 2024 and sell it today you would earn a total of 209.00 from holding First Eagle Gold or generate 7.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo Diversified vs. First Eagle Gold
Performance |
| Timeline |
| Wells Fargo Diversified |
| First Eagle Gold |
Wells Fargo and First Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and First Eagle
The main advantage of trading using opposite Wells Fargo and First Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, First Eagle 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 First Eagle will offset losses from the drop in First Eagle's long position.| Wells Fargo vs. Wells Fargo Diversified | Wells Fargo vs. Wells Fargo Diversified | Wells Fargo vs. Wells Fargo Diversified | Wells Fargo vs. Boston Trust Asset |
| First Eagle vs. Vy T Rowe | First Eagle vs. Principal Lifetime Hybrid | First Eagle vs. Vy T Rowe | First Eagle vs. Wells Fargo Diversified |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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