Correlation Between Wells Fargo and Grupo Carso

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Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Grupo Carso 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 Grupo Carso into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and Grupo Carso SAB, you can compare the effects of market volatilities on Wells Fargo and Grupo Carso 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 Grupo Carso. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Grupo Carso.

Diversification Opportunities for Wells Fargo and Grupo Carso

-0.08
  Correlation Coefficient

Good diversification

The 3 months correlation between Wells and Grupo is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and Grupo Carso SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Carso SAB 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 Grupo Carso. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Carso SAB has no effect on the direction of Wells Fargo i.e., Wells Fargo and Grupo Carso go up and down completely randomly.

Pair Corralation between Wells Fargo and Grupo Carso

Assuming the 90 days trading horizon Wells Fargo is expected to generate 1.75 times more return on investment than Grupo Carso. However, Wells Fargo is 1.75 times more volatile than Grupo Carso SAB. It trades about 0.26 of its potential returns per unit of risk. Grupo Carso SAB is currently generating about 0.03 per unit of risk. If you would invest  129,430  in Wells Fargo on September 1, 2024 and sell it today you would earn a total of  28,570  from holding Wells Fargo or generate 22.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Wells Fargo  vs.  Grupo Carso SAB

 Performance 
       Timeline  
Wells Fargo 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Wells Fargo showed solid returns over the last few months and may actually be approaching a breakup point.
Grupo Carso SAB 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Carso SAB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Grupo Carso is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wells Fargo and Grupo Carso Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Wells Fargo and Grupo Carso

The main advantage of trading using opposite Wells Fargo and Grupo Carso positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Grupo Carso 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 Grupo Carso will offset losses from the drop in Grupo Carso's long position.
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The idea behind Wells Fargo and Grupo Carso SAB pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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