Correlation Between NVIDIA and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both NVIDIA 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 NVIDIA and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA and Wells Fargo, you can compare the effects of market volatilities on NVIDIA 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 NVIDIA with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and Wells Fargo.
Diversification Opportunities for NVIDIA and Wells Fargo
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between NVIDIA and Wells is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Wells Fargo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo and NVIDIA 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 NVIDIA 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 NVIDIA i.e., NVIDIA and Wells Fargo go up and down completely randomly.
Pair Corralation between NVIDIA and Wells Fargo
Given the investment horizon of 90 days NVIDIA is expected to generate 1.96 times more return on investment than Wells Fargo. However, NVIDIA is 1.96 times more volatile than Wells Fargo. It trades about 0.17 of its potential returns per unit of risk. Wells Fargo is currently generating about 0.11 per unit of risk. If you would invest 27,033 in NVIDIA on January 19, 2024 and sell it today you would earn a total of 58,366 from holding NVIDIA or generate 215.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NVIDIA vs. Wells Fargo
Performance |
| Timeline |
| NVIDIA |
| Wells Fargo |
NVIDIA and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVIDIA and Wells Fargo
The main advantage of trading using opposite NVIDIA and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA 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.| NVIDIA vs. Intel | NVIDIA vs. Taiwan Semiconductor Manufacturing | NVIDIA vs. Marvell Technology Group | NVIDIA vs. Micron Technology |
| Wells Fargo vs. Bank of America | Wells Fargo vs. JPMorgan Chase Co | Wells Fargo vs. Toronto Dominion Bank | Wells Fargo vs. Nu Holdings |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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