Correlation Between Wells Fargo and Western Digital
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Western Digital 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 Western Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo Co and Western Digital, you can compare the effects of market volatilities on Wells Fargo and Western Digital 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 Western Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Western Digital.
Diversification Opportunities for Wells Fargo and Western Digital
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Wells and Western is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Co and Western Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital 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 Co are associated (or correlated) with Western Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Digital has no effect on the direction of Wells Fargo i.e., Wells Fargo and Western Digital go up and down completely randomly.
Pair Corralation between Wells Fargo and Western Digital
Assuming the 90 days horizon Wells Fargo is expected to generate 8.35 times less return on investment than Western Digital. But when comparing it to its historical volatility, Wells Fargo Co is 6.92 times less risky than Western Digital. It trades about 0.06 of its potential returns per unit of risk. Western Digital is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3,630 in Western Digital on September 3, 2024 and sell it today you would earn a total of 3,669 from holding Western Digital or generate 101.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo Co vs. Western Digital
Performance |
| Timeline |
| Wells Fargo |
| Western Digital |
Wells Fargo and Western Digital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Western Digital
The main advantage of trading using opposite Wells Fargo and Western Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Western Digital 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 Western Digital will offset losses from the drop in Western Digital's long position.| Wells Fargo vs. Mayfair Gold Corp | Wells Fargo vs. Porvair plc | Wells Fargo vs. Artisan Partners Asset | Wells Fargo vs. Alaska Air Group |
| Western Digital vs. NetApp Inc | Western Digital vs. Logitech International SA | Western Digital vs. HP Inc | Western Digital vs. Dell Technologies |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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