Correlation Between Wells Fargo and Transportadora
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Transportadora 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 Transportadora into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and Transportadora de Gas, you can compare the effects of market volatilities on Wells Fargo and Transportadora 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 Transportadora. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Transportadora.
Diversification Opportunities for Wells Fargo and Transportadora
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wells and Transportadora is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and Transportadora de Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transportadora de Gas 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 Transportadora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transportadora de Gas has no effect on the direction of Wells Fargo i.e., Wells Fargo and Transportadora go up and down completely randomly.
Pair Corralation between Wells Fargo and Transportadora
Assuming the 90 days trading horizon Wells Fargo is expected to generate 0.67 times more return on investment than Transportadora. However, Wells Fargo is 1.5 times less risky than Transportadora. It trades about 0.13 of its potential returns per unit of risk. Transportadora de Gas is currently generating about 0.03 per unit of risk. If you would invest 1,677,500 in Wells Fargo on October 23, 2024 and sell it today you would earn a total of 170,000 from holding Wells Fargo or generate 10.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo vs. Transportadora de Gas
Performance |
| Timeline |
| Wells Fargo |
| Transportadora de Gas |
Wells Fargo and Transportadora Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Transportadora
The main advantage of trading using opposite Wells Fargo and Transportadora positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Transportadora 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 Transportadora will offset losses from the drop in Transportadora's long position.| Wells Fargo vs. Transportadora de Gas | Wells Fargo vs. Telecom Argentina | Wells Fargo vs. United States Steel | Wells Fargo vs. Harmony Gold Mining |
| Transportadora vs. Agrometal SAI | Transportadora vs. Compania de Transporte | Transportadora vs. Telecom Argentina | Transportadora vs. United States Steel |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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