Correlation Between Wells Fargo and Farmers Merchants
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Farmers Merchants 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 Farmers Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and Farmers Merchants Bancorp, you can compare the effects of market volatilities on Wells Fargo and Farmers Merchants 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 Farmers Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Farmers Merchants.
Diversification Opportunities for Wells Fargo and Farmers Merchants
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Wells and Farmers is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and Farmers Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmers Merchants Bancorp 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 Farmers Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmers Merchants Bancorp has no effect on the direction of Wells Fargo i.e., Wells Fargo and Farmers Merchants go up and down completely randomly.
Pair Corralation between Wells Fargo and Farmers Merchants
Considering the 90-day investment horizon Wells Fargo is expected to generate 0.59 times more return on investment than Farmers Merchants. However, Wells Fargo is 1.68 times less risky than Farmers Merchants. It trades about 0.1 of its potential returns per unit of risk. Farmers Merchants Bancorp is currently generating about 0.05 per unit of risk. If you would invest 4,014 in Wells Fargo on September 12, 2024 and sell it today you would earn a total of 3,191 from holding Wells Fargo or generate 79.5% 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. Farmers Merchants Bancorp
Performance |
| Timeline |
| Wells Fargo |
| Farmers Merchants Bancorp |
Wells Fargo and Farmers Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Farmers Merchants
The main advantage of trading using opposite Wells Fargo and Farmers Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Farmers Merchants 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 Farmers Merchants will offset losses from the drop in Farmers Merchants' 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 |
| Farmers Merchants vs. Home Federal Bancorp | Farmers Merchants vs. First Financial Northwest | Farmers Merchants vs. First Northwest Bancorp | Farmers Merchants vs. First Capital |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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