Correlation Between Wells Fargo and International Bancshares
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and International Bancshares 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 International Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and International Bancshares, you can compare the effects of market volatilities on Wells Fargo and International Bancshares 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 International Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and International Bancshares.
Diversification Opportunities for Wells Fargo and International Bancshares
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Wells and International is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and International Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Bancshares 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 International Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Bancshares has no effect on the direction of Wells Fargo i.e., Wells Fargo and International Bancshares go up and down completely randomly.
Pair Corralation between Wells Fargo and International Bancshares
Considering the 90-day investment horizon Wells Fargo is expected to generate 0.89 times more return on investment than International Bancshares. However, Wells Fargo is 1.12 times less risky than International Bancshares. It trades about -0.05 of its potential returns per unit of risk. International Bancshares is currently generating about -0.06 per unit of risk. If you would invest 7,260 in Wells Fargo on September 13, 2024 and sell it today you would lose (100.50) from holding Wells Fargo or give up 1.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo vs. International Bancshares
Performance |
| Timeline |
| Wells Fargo |
| International Bancshares |
Wells Fargo and International Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and International Bancshares
The main advantage of trading using opposite Wells Fargo and International Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, International Bancshares 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 International Bancshares will offset losses from the drop in International Bancshares' long position.| Wells Fargo vs. Citigroup | Wells Fargo vs. Nu Holdings | Wells Fargo vs. HSBC Holdings PLC | Wells Fargo vs. Bank of Montreal |
| International Bancshares vs. Home Federal Bancorp | International Bancshares vs. First Financial Northwest | International Bancshares vs. First Northwest Bancorp | International Bancshares 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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