Correlation Between Wells Fargo and Cable One
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Cable One 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 Cable One into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and Cable One, you can compare the effects of market volatilities on Wells Fargo and Cable One 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 Cable One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Cable One.
Diversification Opportunities for Wells Fargo and Cable One
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Wells and Cable is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and Cable One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cable One 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 Cable One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cable One has no effect on the direction of Wells Fargo i.e., Wells Fargo and Cable One go up and down completely randomly.
Pair Corralation between Wells Fargo and Cable One
Assuming the 90 days trading horizon Wells Fargo is expected to generate 1.05 times less return on investment than Cable One. In addition to that, Wells Fargo is 1.26 times more volatile than Cable One. It trades about 0.18 of its total potential returns per unit of risk. Cable One is currently generating about 0.24 per unit of volatility. If you would invest 965.00 in Cable One on September 19, 2024 and sell it today you would earn a total of 190.00 from holding Cable One or generate 19.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.12% |
| Values | Daily Returns |
Wells Fargo vs. Cable One
Performance |
| Timeline |
| Wells Fargo |
| Cable One |
Wells Fargo and Cable One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Cable One
The main advantage of trading using opposite Wells Fargo and Cable One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Cable One 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 Cable One will offset losses from the drop in Cable One'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 |
| Cable One vs. Lloyds Banking Group | Cable One vs. Unity Software | Cable One vs. Capital One Financial | Cable One vs. HDFC Bank Limited |
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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