Correlation Between SunCoke Energy and WELLS

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Can any of the company-specific risk be diversified away by investing in both SunCoke Energy and WELLS 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 SunCoke Energy and WELLS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SunCoke Energy and WELLS FARGO NEW, you can compare the effects of market volatilities on SunCoke Energy and WELLS 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 SunCoke Energy with a short position of WELLS. Check out your portfolio center. Please also check ongoing floating volatility patterns of SunCoke Energy and WELLS.

Diversification Opportunities for SunCoke Energy and WELLS

0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between SunCoke and WELLS is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding SunCoke Energy and WELLS FARGO NEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WELLS FARGO NEW and SunCoke Energy 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 SunCoke Energy are associated (or correlated) with WELLS. 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 NEW has no effect on the direction of SunCoke Energy i.e., SunCoke Energy and WELLS go up and down completely randomly.

Pair Corralation between SunCoke Energy and WELLS

Considering the 90-day investment horizon SunCoke Energy is expected to generate 2.33 times more return on investment than WELLS. However, SunCoke Energy is 2.33 times more volatile than WELLS FARGO NEW. It trades about 0.02 of its potential returns per unit of risk. WELLS FARGO NEW is currently generating about 0.0 per unit of risk. If you would invest  862.00  in SunCoke Energy on November 9, 2024 and sell it today you would earn a total of  97.00  from holding SunCoke Energy or generate 11.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy93.51%
ValuesDaily Returns

SunCoke Energy  vs.  WELLS FARGO NEW

 Performance 
       Timeline  
SunCoke Energy 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days SunCoke Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
WELLS FARGO NEW 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days WELLS FARGO NEW has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, WELLS is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

SunCoke Energy and WELLS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SunCoke Energy and WELLS

The main advantage of trading using opposite SunCoke Energy and WELLS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SunCoke Energy position performs unexpectedly, WELLS 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 will offset losses from the drop in WELLS's long position.
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The idea behind SunCoke Energy and WELLS FARGO NEW 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.
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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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