Correlation Between International Business and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both International Business and Wells Fargo 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 International Business and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Business Machines and Wells Fargo, you can compare the effects of market volatilities on International Business and Wells Fargo 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 International Business with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and Wells Fargo.
Diversification Opportunities for International Business and Wells Fargo
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between International and Wells is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Wells Fargo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo and International Business 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 International Business Machines are associated (or correlated) with Wells Fargo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wells Fargo has no effect on the direction of International Business i.e., International Business and Wells Fargo go up and down completely randomly.
Pair Corralation between International Business and Wells Fargo
Assuming the 90 days trading horizon International Business Machines is expected to under-perform the Wells Fargo. In addition to that, International Business is 1.17 times more volatile than Wells Fargo. It trades about -0.1 of its total potential returns per unit of risk. Wells Fargo is currently generating about 0.0 per unit of volatility. If you would invest 1,293,500 in Wells Fargo on January 24, 2024 and sell it today you would lose (11,350) from holding Wells Fargo or give up 0.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Business Machine vs. Wells Fargo
Performance |
| Timeline |
| International Business |
| Wells Fargo |
International Business and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Business and Wells Fargo
The main advantage of trading using opposite International Business and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business position performs unexpectedly, Wells Fargo 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 Wells Fargo will offset losses from the drop in Wells Fargo's long position.| International Business vs. BANK OF AMERICA | International Business vs. Harmony Gold Mining | International Business vs. Transportadora de Gas | International Business vs. Compania de Transporte |
| Wells Fargo vs. United States Steel | Wells Fargo vs. Telecom Argentina | Wells Fargo vs. Transportadora de Gas | Wells Fargo vs. Harmony Gold Mining |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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