Correlation Between Wells Fargo and Independent Bank
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Independent Bank 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 Independent Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and Independent Bank, you can compare the effects of market volatilities on Wells Fargo and Independent Bank 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 Independent Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Independent Bank.
Diversification Opportunities for Wells Fargo and Independent Bank
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Wells and Independent is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and Independent Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Independent Bank 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 Independent Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Independent Bank has no effect on the direction of Wells Fargo i.e., Wells Fargo and Independent Bank go up and down completely randomly.
Pair Corralation between Wells Fargo and Independent Bank
Considering the 90-day investment horizon Wells Fargo is expected to generate 0.8 times more return on investment than Independent Bank. However, Wells Fargo is 1.25 times less risky than Independent Bank. It trades about 0.13 of its potential returns per unit of risk. Independent Bank is currently generating about 0.05 per unit of risk. If you would invest 4,491 in Wells Fargo on September 3, 2024 and sell it today you would earn a total of 3,126 from holding Wells Fargo or generate 69.61% 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. Independent Bank
Performance |
| Timeline |
| Wells Fargo |
| Independent Bank |
Wells Fargo and Independent Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Independent Bank
The main advantage of trading using opposite Wells Fargo and Independent Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Independent Bank 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 Independent Bank will offset losses from the drop in Independent Bank's long position.| Wells Fargo vs. Partner Communications | Wells Fargo vs. Merck Company | Wells Fargo vs. Western Midstream Partners | Wells Fargo vs. Edgewise Therapeutics |
| Independent Bank vs. JPMorgan Chase Co | Independent Bank vs. Citigroup | Independent Bank vs. Wells Fargo | Independent Bank 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
Other Complementary Tools
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments |