Correlation Between Wells Fargo and First Community
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and First Community 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 First Community into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and First Community, you can compare the effects of market volatilities on Wells Fargo and First Community 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 First Community. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and First Community.
Diversification Opportunities for Wells Fargo and First Community
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Wells and First is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and First Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community 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 First Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Community has no effect on the direction of Wells Fargo i.e., Wells Fargo and First Community go up and down completely randomly.
Pair Corralation between Wells Fargo and First Community
Considering the 90-day investment horizon Wells Fargo is expected to generate 2.38 times more return on investment than First Community. However, Wells Fargo is 2.38 times more volatile than First Community. It trades about 0.28 of its potential returns per unit of risk. First Community is currently generating about 0.4 per unit of risk. If you would invest 6,334 in Wells Fargo on September 4, 2024 and sell it today you would earn a total of 1,194 from holding Wells Fargo or generate 18.85% 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. First Community
Performance |
| Timeline |
| Wells Fargo |
| First Community |
Wells Fargo and First Community Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and First Community
The main advantage of trading using opposite Wells Fargo and First Community positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, First Community 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 First Community will offset losses from the drop in First Community's long position.| Wells Fargo vs. Citigroup | Wells Fargo vs. Aquagold International | Wells Fargo vs. Thrivent High Yield | Wells Fargo vs. Morningstar Unconstrained Allocation |
| First Community vs. Community West Bancshares | First Community vs. First Financial Northwest | First Community vs. First Northwest Bancorp | First Community vs. Home Federal Bancorp |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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