Correlation Between Wells Fargo and Franklin Federal
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Franklin Federal 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 Franklin Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo Advantage and Franklin Federal Limited Term, you can compare the effects of market volatilities on Wells Fargo and Franklin Federal 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 Franklin Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Franklin Federal.
Diversification Opportunities for Wells Fargo and Franklin Federal
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wells and Franklin is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Advantage and Franklin Federal Limited Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Federal Lim 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 Advantage are associated (or correlated) with Franklin Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Federal Lim has no effect on the direction of Wells Fargo i.e., Wells Fargo and Franklin Federal go up and down completely randomly.
Pair Corralation between Wells Fargo and Franklin Federal
Assuming the 90 days horizon Wells Fargo Advantage is expected to generate 6.84 times more return on investment than Franklin Federal. However, Wells Fargo is 6.84 times more volatile than Franklin Federal Limited Term. It trades about 0.38 of its potential returns per unit of risk. Franklin Federal Limited Term is currently generating about 0.62 per unit of risk. If you would invest 1,161 in Wells Fargo Advantage on September 13, 2024 and sell it today you would earn a total of 30.00 from holding Wells Fargo Advantage or generate 2.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Wells Fargo Advantage vs. Franklin Federal Limited Term
Performance |
| Timeline |
| Wells Fargo Advantage |
| Franklin Federal Lim |
Wells Fargo and Franklin Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Franklin Federal
The main advantage of trading using opposite Wells Fargo and Franklin Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Franklin Federal 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 Franklin Federal will offset losses from the drop in Franklin Federal's long position.| Wells Fargo vs. Wells Fargo Strategic | Wells Fargo vs. Wells Fargo Emerging | Wells Fargo vs. Wells Fargo Alternative | Wells Fargo vs. Wells Fargo Alternative |
| Franklin Federal vs. Franklin Mutual Beacon | Franklin Federal vs. Templeton Developing Markets | Franklin Federal vs. Franklin Mutual Global | Franklin Federal vs. Franklin Mutual Global |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
Other Complementary Tools
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data |