Correlation Between Wells Fargo and Southern California
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Southern California 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 Southern California into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and Southern California Bancorp, you can compare the effects of market volatilities on Wells Fargo and Southern California 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 Southern California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Southern California.
Diversification Opportunities for Wells Fargo and Southern California
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Wells and Southern is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and Southern California Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern California 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 Southern California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern California has no effect on the direction of Wells Fargo i.e., Wells Fargo and Southern California go up and down completely randomly.
Pair Corralation between Wells Fargo and Southern California
Considering the 90-day investment horizon Wells Fargo is expected to generate 1.07 times more return on investment than Southern California. However, Wells Fargo is 1.07 times more volatile than Southern California Bancorp. It trades about 0.11 of its potential returns per unit of risk. Southern California Bancorp is currently generating about 0.05 per unit of risk. If you would invest 4,103 in Wells Fargo on September 12, 2024 and sell it today you would earn a total of 3,090 from holding Wells Fargo or generate 75.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo vs. Southern California Bancorp
Performance |
| Timeline |
| Wells Fargo |
| Southern California |
Wells Fargo and Southern California Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Southern California
The main advantage of trading using opposite Wells Fargo and Southern California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Southern California 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 Southern California will offset losses from the drop in Southern California's long position.| Wells Fargo vs. Bank of America | Wells Fargo vs. Victory Integrity Smallmid Cap | Wells Fargo vs. Hilton Worldwide Holdings | Wells Fargo vs. NVIDIA |
| Southern California vs. JPMorgan Chase Co | Southern California vs. Citigroup | Southern California vs. Wells Fargo | Southern California vs. Toronto Dominion 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
Other Complementary Tools
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios |