Correlation Between Federal Home and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both Federal Home 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 Federal Home and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal Home Loan and Wells Fargo, you can compare the effects of market volatilities on Federal Home 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 Federal Home with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Home and Wells Fargo.
Diversification Opportunities for Federal Home and Wells Fargo
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Federal and Wells is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Federal Home Loan and Wells Fargo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo and Federal Home 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 Federal Home Loan 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 Federal Home i.e., Federal Home and Wells Fargo go up and down completely randomly.
Pair Corralation between Federal Home and Wells Fargo
Assuming the 90 days horizon Federal Home Loan is expected to generate 3.25 times more return on investment than Wells Fargo. However, Federal Home is 3.25 times more volatile than Wells Fargo. It trades about 0.48 of its potential returns per unit of risk. Wells Fargo is currently generating about 0.31 per unit of risk. If you would invest 116.00 in Federal Home Loan on September 1, 2024 and sell it today you would earn a total of 180.00 from holding Federal Home Loan or generate 155.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Federal Home Loan vs. Wells Fargo
Performance |
| Timeline |
| Federal Home Loan |
| Wells Fargo |
Federal Home and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Home and Wells Fargo
The main advantage of trading using opposite Federal Home and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Home 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.| Federal Home vs. Superior Plus Corp | Federal Home vs. NMI Holdings | Federal Home vs. Origin Agritech | Federal Home vs. SIVERS SEMICONDUCTORS AB |
| Wells Fargo vs. Singapore Telecommunications Limited | Wells Fargo vs. Computershare Limited | Wells Fargo vs. Grand Canyon Education | Wells Fargo vs. Adtalem Global Education |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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