Correlation Between Ford and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Wells Fargo Advantage, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Wells Fargo.
Diversification Opportunities for Ford and Wells Fargo
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and Wells is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor 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 Ford 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 Ford Motor 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 Ford i.e., Ford and Wells Fargo go up and down completely randomly.
Pair Corralation between Ford and Wells Fargo
Taking into account the 90-day investment horizon Ford is expected to generate 15.66 times less return on investment than Wells Fargo. In addition to that, Ford is 1.28 times more volatile than Wells Fargo Advantage. It trades about 0.0 of its total potential returns per unit of risk. Wells Fargo Advantage is currently generating about 0.05 per unit of volatility. If you would invest 4,563 in Wells Fargo Advantage on October 25, 2024 and sell it today you would earn a total of 1,685 from holding Wells Fargo Advantage or generate 36.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Wells Fargo Advantage
Performance |
| Timeline |
| Ford Motor |
| Wells Fargo Advantage |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Ford and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Wells Fargo
The main advantage of trading using opposite Ford and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor and Wells Fargo Advantage 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 Advantage | Wells Fargo vs. Franklin Gold Precious | Wells Fargo vs. Precious Metals Ultrasector | Wells Fargo vs. International Investors Gold |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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