Correlation Between Wells Fargo and CF Bankshares
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and CF Bankshares 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 CF Bankshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and CF Bankshares, you can compare the effects of market volatilities on Wells Fargo and CF Bankshares 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 CF Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and CF Bankshares.
Diversification Opportunities for Wells Fargo and CF Bankshares
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Wells and CFBK is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and CF Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Bankshares 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 CF Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Bankshares has no effect on the direction of Wells Fargo i.e., Wells Fargo and CF Bankshares go up and down completely randomly.
Pair Corralation between Wells Fargo and CF Bankshares
Considering the 90-day investment horizon Wells Fargo is expected to generate 1.04 times less return on investment than CF Bankshares. But when comparing it to its historical volatility, Wells Fargo is 1.03 times less risky than CF Bankshares. It trades about 0.19 of its potential returns per unit of risk. CF Bankshares is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 2,130 in CF Bankshares on September 3, 2024 and sell it today you would earn a total of 692.00 from holding CF Bankshares or generate 32.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo vs. CF Bankshares
Performance |
| Timeline |
| Wells Fargo |
| CF Bankshares |
Wells Fargo and CF Bankshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and CF Bankshares
The main advantage of trading using opposite Wells Fargo and CF Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, CF Bankshares 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 CF Bankshares will offset losses from the drop in CF Bankshares' long position.| Wells Fargo vs. Partner Communications | Wells Fargo vs. Merck Company | Wells Fargo vs. Western Midstream Partners | Wells Fargo vs. Edgewise Therapeutics |
| CF Bankshares vs. JPMorgan Chase Co | CF Bankshares vs. Citigroup | CF Bankshares vs. Wells Fargo | CF Bankshares 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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