Correlation Between Wells Fargo and Talanx AG
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Talanx AG 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 Talanx AG 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 Talanx AG, you can compare the effects of market volatilities on Wells Fargo and Talanx AG 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 Talanx AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Talanx AG.
Diversification Opportunities for Wells Fargo and Talanx AG
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Wells and Talanx is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding West Fraser Timber and Talanx AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talanx AG 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 Talanx AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talanx AG has no effect on the direction of Wells Fargo i.e., Wells Fargo and Talanx AG go up and down completely randomly.
Pair Corralation between Wells Fargo and Talanx AG
Assuming the 90 days horizon Wells Fargo is expected to generate 2.56 times less return on investment than Talanx AG. In addition to that, Wells Fargo is 1.29 times more volatile than Talanx AG. It trades about 0.03 of its total potential returns per unit of risk. Talanx AG is currently generating about 0.1 per unit of volatility. If you would invest 5,238 in Talanx AG on September 12, 2024 and sell it today you would earn a total of 3,162 from holding Talanx AG or generate 60.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
West Fraser Timber vs. Talanx AG
Performance |
| Timeline |
| West Fraser Timber |
| Talanx AG |
Wells Fargo and Talanx AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Talanx AG
The main advantage of trading using opposite Wells Fargo and Talanx AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Talanx AG 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 Talanx AG will offset losses from the drop in Talanx AG's long position.| Wells Fargo vs. Charter Communications | Wells Fargo vs. Zoom Video Communications | Wells Fargo vs. Shenandoah Telecommunications | Wells Fargo vs. Highlight Communications AG |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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