Correlation Between Wells Fargo and Sumitomo Mitsui
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Sumitomo Mitsui 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 Sumitomo Mitsui into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and Sumitomo Mitsui Financial, you can compare the effects of market volatilities on Wells Fargo and Sumitomo Mitsui 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 Sumitomo Mitsui. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Sumitomo Mitsui.
Diversification Opportunities for Wells Fargo and Sumitomo Mitsui
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wells and Sumitomo is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and Sumitomo Mitsui Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Financial 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 Sumitomo Mitsui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Mitsui Financial has no effect on the direction of Wells Fargo i.e., Wells Fargo and Sumitomo Mitsui go up and down completely randomly.
Pair Corralation between Wells Fargo and Sumitomo Mitsui
Considering the 90-day investment horizon Wells Fargo is expected to generate 1.73 times more return on investment than Sumitomo Mitsui. However, Wells Fargo is 1.73 times more volatile than Sumitomo Mitsui Financial. It trades about 0.26 of its potential returns per unit of risk. Sumitomo Mitsui Financial is currently generating about 0.33 per unit of risk. If you would invest 6,523 in Wells Fargo on August 29, 2024 and sell it today you would earn a total of 1,198 from holding Wells Fargo or generate 18.37% 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. Sumitomo Mitsui Financial
Performance |
| Timeline |
| Wells Fargo |
| Sumitomo Mitsui Financial |
Wells Fargo and Sumitomo Mitsui Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Sumitomo Mitsui
The main advantage of trading using opposite Wells Fargo and Sumitomo Mitsui positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Sumitomo Mitsui 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 Sumitomo Mitsui will offset losses from the drop in Sumitomo Mitsui's long position.| Wells Fargo vs. Bank of America | Wells Fargo vs. JPMorgan Chase Co | Wells Fargo vs. Toronto Dominion Bank | Wells Fargo vs. Nu Holdings |
| Sumitomo Mitsui vs. Barclays PLC ADR | Sumitomo Mitsui vs. Mitsubishi UFJ Financial | Sumitomo Mitsui vs. ING Group NV | Sumitomo Mitsui vs. HSBC Holdings PLC |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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