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 Co, 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
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Wells is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Wells Fargo Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo 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 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 Motor is expected to generate 6.49 times more return on investment than Wells Fargo. However, Ford is 6.49 times more volatile than Wells Fargo Co. It trades about 0.01 of its potential returns per unit of risk. Wells Fargo Co is currently generating about 0.06 per unit of risk. If you would invest 1,148 in Ford Motor on September 3, 2024 and sell it today you would lose (35.00) from holding Ford Motor or give up 3.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Wells Fargo Co
Performance |
| Timeline |
| Ford Motor |
| Wells Fargo |
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.| Ford vs. GreenPower Motor | Ford vs. ZEEKR Intelligent Technology | Ford vs. Volcon Inc | Ford vs. Ford Motor |
| Wells Fargo vs. Mayfair Gold Corp | Wells Fargo vs. Porvair plc | Wells Fargo vs. Artisan Partners Asset | Wells Fargo vs. Alaska Air Group |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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