Correlation Between Wells Fargo and ABN AMRO
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and ABN AMRO 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 ABN AMRO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and ABN AMRO Bank, you can compare the effects of market volatilities on Wells Fargo and ABN AMRO 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 ABN AMRO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and ABN AMRO.
Diversification Opportunities for Wells Fargo and ABN AMRO
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Wells and ABN is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and ABN AMRO Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABN AMRO Bank 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 ABN AMRO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABN AMRO Bank has no effect on the direction of Wells Fargo i.e., Wells Fargo and ABN AMRO go up and down completely randomly.
Pair Corralation between Wells Fargo and ABN AMRO
Considering the 90-day investment horizon Wells Fargo is expected to generate 1.0 times more return on investment than ABN AMRO. However, Wells Fargo is 1.0 times more volatile than ABN AMRO Bank. It trades about 0.11 of its potential returns per unit of risk. ABN AMRO Bank is currently generating about 0.04 per unit of risk. If you would invest 4,060 in Wells Fargo on August 31, 2024 and sell it today you would earn a total of 3,557 from holding Wells Fargo or generate 87.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo vs. ABN AMRO Bank
Performance |
| Timeline |
| Wells Fargo |
| ABN AMRO Bank |
Wells Fargo and ABN AMRO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and ABN AMRO
The main advantage of trading using opposite Wells Fargo and ABN AMRO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, ABN AMRO 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 ABN AMRO will offset losses from the drop in ABN AMRO's long position.| Wells Fargo vs. RLJ Lodging Trust | Wells Fargo vs. Aquagold International | Wells Fargo vs. Stepstone Group | Wells Fargo vs. Morningstar Unconstrained Allocation |
| ABN AMRO vs. Bank of America | ABN AMRO vs. Bank of America | ABN AMRO vs. Bank of America | ABN AMRO vs. China Construction Bank |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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