Correlation Between Wells Fargo and IShares Trust
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and IShares 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 IShares 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 iShares Trust , you can compare the effects of market volatilities on Wells Fargo and IShares 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 IShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and IShares Trust.
Diversification Opportunities for Wells Fargo and IShares Trust
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Wells and IShares is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust 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 IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of Wells Fargo i.e., Wells Fargo and IShares Trust go up and down completely randomly.
Pair Corralation between Wells Fargo and IShares Trust
Assuming the 90 days trading horizon Wells Fargo is expected to generate 1.99 times more return on investment than IShares Trust. However, Wells Fargo is 1.99 times more volatile than iShares Trust . It trades about 0.18 of its potential returns per unit of risk. iShares Trust is currently generating about 0.08 per unit of risk. If you would invest 9,083 in Wells Fargo on September 19, 2024 and sell it today you would earn a total of 1,742 from holding Wells Fargo or generate 19.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 97.56% |
| Values | Daily Returns |
Wells Fargo vs. iShares Trust
Performance |
| Timeline |
| Wells Fargo |
| iShares Trust |
Wells Fargo and IShares Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and IShares Trust
The main advantage of trading using opposite Wells Fargo and IShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, IShares 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 IShares Trust will offset losses from the drop in IShares Trust's long position.| Wells Fargo vs. HSBC Holdings plc | Wells Fargo vs. Barclays PLC | Wells Fargo vs. BTG Pactual Logstica | Wells Fargo vs. Plano Plano Desenvolvimento |
| IShares Trust vs. Energisa SA | IShares Trust vs. BTG Pactual Logstica | IShares Trust vs. Plano Plano Desenvolvimento | IShares Trust vs. Companhia Habitasul de |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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