Correlation Between Wells Fargo and ATT
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and ATT 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 ATT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and ATT Inc, you can compare the effects of market volatilities on Wells Fargo and ATT 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 ATT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and ATT.
Diversification Opportunities for Wells Fargo and ATT
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Wells and ATT is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc 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 ATT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATT Inc has no effect on the direction of Wells Fargo i.e., Wells Fargo and ATT go up and down completely randomly.
Pair Corralation between Wells Fargo and ATT
Assuming the 90 days trading horizon Wells Fargo is expected to generate 0.97 times more return on investment than ATT. However, Wells Fargo is 1.03 times less risky than ATT. It trades about -0.09 of its potential returns per unit of risk. ATT Inc is currently generating about -0.11 per unit of risk. If you would invest 2,066 in Wells Fargo on September 1, 2024 and sell it today you would lose (32.00) from holding Wells Fargo or give up 1.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Wells Fargo vs. ATT Inc
Performance |
| Timeline |
| Wells Fargo |
| ATT Inc |
Wells Fargo and ATT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and ATT
The main advantage of trading using opposite Wells Fargo and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, ATT 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 ATT will offset losses from the drop in ATT's long position.| Wells Fargo vs. Bank of America | Wells Fargo vs. Bank of America | Wells Fargo vs. China Construction Bank | Wells Fargo vs. Bank of America |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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