Correlation Between Wells Fargo and Washington Trust
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Washington Trust 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 Washington Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and Washington Trust Bancorp, you can compare the effects of market volatilities on Wells Fargo and Washington Trust 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 Washington Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Washington Trust.
Diversification Opportunities for Wells Fargo and Washington Trust
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Wells and Washington is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and Washington Trust Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Trust 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 Washington Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Trust Bancorp has no effect on the direction of Wells Fargo i.e., Wells Fargo and Washington Trust go up and down completely randomly.
Pair Corralation between Wells Fargo and Washington Trust
Considering the 90-day investment horizon Wells Fargo is expected to generate 1.47 times less return on investment than Washington Trust. But when comparing it to its historical volatility, Wells Fargo is 1.24 times less risky than Washington Trust. It trades about 0.11 of its potential returns per unit of risk. Washington Trust Bancorp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,483 in Washington Trust Bancorp on September 3, 2024 and sell it today you would earn a total of 1,231 from holding Washington Trust Bancorp or generate 49.58% 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. Washington Trust Bancorp
Performance |
| Timeline |
| Wells Fargo |
| Washington Trust Bancorp |
Wells Fargo and Washington Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Washington Trust
The main advantage of trading using opposite Wells Fargo and Washington Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Washington Trust 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 Washington Trust will offset losses from the drop in Washington Trust's long position.| Wells Fargo vs. Partner Communications | Wells Fargo vs. Merck Company | Wells Fargo vs. Western Midstream Partners | Wells Fargo vs. Edgewise Therapeutics |
| Washington Trust vs. JPMorgan Chase Co | Washington Trust vs. Citigroup | Washington Trust vs. Wells Fargo | Washington Trust 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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