Correlation Between NYSE Composite and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Wells Fargo Advantage, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Wells Fargo.
Diversification Opportunities for NYSE Composite and Wells Fargo
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NYSE and Wells is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite 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 NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and Wells Fargo go up and down completely randomly.
Pair Corralation between NYSE Composite and Wells Fargo
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.72 times more return on investment than Wells Fargo. However, NYSE Composite is 1.72 times more volatile than Wells Fargo Advantage. It trades about 0.19 of its potential returns per unit of risk. Wells Fargo Advantage is currently generating about 0.0 per unit of risk. If you would invest 1,956,073 in NYSE Composite on August 25, 2024 and sell it today you would earn a total of 56,272 from holding NYSE Composite or generate 2.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Wells Fargo Advantage
Performance |
| Timeline |
NYSE Composite and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Wells Fargo Advantage
Pair trading matchups for Wells Fargo
Pair Trading with NYSE Composite and Wells Fargo
The main advantage of trading using opposite NYSE Composite and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. Awilco Drilling PLC | NYSE Composite vs. AKITA Drilling | NYSE Composite vs. SunOpta | NYSE Composite vs. Delek Drilling |
| Wells Fargo vs. HUMANA INC | Wells Fargo vs. Aquagold International | Wells Fargo vs. Barloworld Ltd ADR | Wells Fargo vs. Morningstar Unconstrained Allocation |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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