Correlation Between Wells Fargo and STMICROELECTRONICS
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and STMICROELECTRONICS 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 STMICROELECTRONICS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and STMICROELECTRONICS, you can compare the effects of market volatilities on Wells Fargo and STMICROELECTRONICS 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 STMICROELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and STMICROELECTRONICS.
Diversification Opportunities for Wells Fargo and STMICROELECTRONICS
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Wells and STMICROELECTRONICS is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and STMICROELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMICROELECTRONICS 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 are associated (or correlated) with STMICROELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMICROELECTRONICS has no effect on the direction of Wells Fargo i.e., Wells Fargo and STMICROELECTRONICS go up and down completely randomly.
Pair Corralation between Wells Fargo and STMICROELECTRONICS
Assuming the 90 days horizon Wells Fargo is expected to generate 1.27 times more return on investment than STMICROELECTRONICS. However, Wells Fargo is 1.27 times more volatile than STMICROELECTRONICS. It trades about 0.3 of its potential returns per unit of risk. STMICROELECTRONICS is currently generating about -0.05 per unit of risk. If you would invest 5,168 in Wells Fargo on September 5, 2024 and sell it today you would earn a total of 1,922 from holding Wells Fargo or generate 37.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo vs. STMICROELECTRONICS
Performance |
| Timeline |
| Wells Fargo |
| STMICROELECTRONICS |
Wells Fargo and STMICROELECTRONICS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and STMICROELECTRONICS
The main advantage of trading using opposite Wells Fargo and STMICROELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, STMICROELECTRONICS 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 STMICROELECTRONICS will offset losses from the drop in STMICROELECTRONICS's long position.| Wells Fargo vs. STMICROELECTRONICS | Wells Fargo vs. SOLSTAD OFFSHORE NK | Wells Fargo vs. SIEM OFFSHORE NEW | Wells Fargo vs. WT OFFSHORE |
| STMICROELECTRONICS vs. TOTAL GABON | STMICROELECTRONICS vs. Walgreens Boots Alliance | STMICROELECTRONICS vs. Peak Resources Limited |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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