Correlation Between Wells Fargo and Heritage Commerce
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Heritage Commerce 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 Heritage Commerce into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and Heritage Commerce Corp, you can compare the effects of market volatilities on Wells Fargo and Heritage Commerce 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 Heritage Commerce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Heritage Commerce.
Diversification Opportunities for Wells Fargo and Heritage Commerce
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wells and Heritage is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and Heritage Commerce Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Commerce Corp 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 Heritage Commerce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Commerce Corp has no effect on the direction of Wells Fargo i.e., Wells Fargo and Heritage Commerce go up and down completely randomly.
Pair Corralation between Wells Fargo and Heritage Commerce
Considering the 90-day investment horizon Wells Fargo is expected to generate 0.98 times more return on investment than Heritage Commerce. However, Wells Fargo is 1.02 times less risky than Heritage Commerce. It trades about 0.28 of its potential returns per unit of risk. Heritage Commerce Corp is currently generating about 0.18 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo vs. Heritage Commerce Corp
Performance |
| Timeline |
| Wells Fargo |
| Heritage Commerce Corp |
Wells Fargo and Heritage Commerce Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Heritage Commerce
The main advantage of trading using opposite Wells Fargo and Heritage Commerce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Heritage Commerce 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 Heritage Commerce will offset losses from the drop in Heritage Commerce's long position.| Wells Fargo vs. Citigroup | Wells Fargo vs. Aquagold International | Wells Fargo vs. Thrivent High Yield | Wells Fargo vs. Morningstar Unconstrained Allocation |
| Heritage Commerce vs. Home Federal Bancorp | Heritage Commerce vs. First Financial Northwest | Heritage Commerce vs. First Northwest Bancorp | Heritage Commerce 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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