Correlation Between Wells Fargo and Superior Plus
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Superior Plus 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 Superior Plus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between West Fraser Timber and Superior Plus Corp, you can compare the effects of market volatilities on Wells Fargo and Superior Plus 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 Superior Plus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Superior Plus.
Diversification Opportunities for Wells Fargo and Superior Plus
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Wells and Superior is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding West Fraser Timber and Superior Plus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Superior Plus Corp 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 West Fraser Timber are associated (or correlated) with Superior Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Superior Plus Corp has no effect on the direction of Wells Fargo i.e., Wells Fargo and Superior Plus go up and down completely randomly.
Pair Corralation between Wells Fargo and Superior Plus
Assuming the 90 days horizon West Fraser Timber is expected to generate 0.85 times more return on investment than Superior Plus. However, West Fraser Timber is 1.18 times less risky than Superior Plus. It trades about 0.03 of its potential returns per unit of risk. Superior Plus Corp is currently generating about -0.02 per unit of risk. If you would invest 7,622 in West Fraser Timber on September 12, 2024 and sell it today you would earn a total of 1,153 from holding West Fraser Timber or generate 15.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
West Fraser Timber vs. Superior Plus Corp
Performance |
| Timeline |
| West Fraser Timber |
| Superior Plus Corp |
Wells Fargo and Superior Plus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Superior Plus
The main advantage of trading using opposite Wells Fargo and Superior Plus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Superior Plus 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 Superior Plus will offset losses from the drop in Superior Plus' long position.| Wells Fargo vs. Charter Communications | Wells Fargo vs. Zoom Video Communications | Wells Fargo vs. Shenandoah Telecommunications | Wells Fargo vs. Highlight Communications AG |
| Superior Plus vs. AIR PRODCHEMICALS | Superior Plus vs. Suntory Beverage Food | Superior Plus vs. Molson Coors Beverage | Superior Plus vs. Monster Beverage Corp |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
Other Complementary Tools
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data |