Correlation Between Workday and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both Workday 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 Workday and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Workday and Wells Fargo, you can compare the effects of market volatilities on Workday 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 Workday with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Workday and Wells Fargo.
Diversification Opportunities for Workday and Wells Fargo
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Workday and Wells is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Workday and Wells Fargo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo and Workday 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 Workday 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 Workday i.e., Workday and Wells Fargo go up and down completely randomly.
Pair Corralation between Workday and Wells Fargo
Given the investment horizon of 90 days Workday is expected to generate 1.0 times less return on investment than Wells Fargo. In addition to that, Workday is 1.4 times more volatile than Wells Fargo. It trades about 0.03 of its total potential returns per unit of risk. Wells Fargo is currently generating about 0.04 per unit of volatility. If you would invest 4,213 in Wells Fargo on January 17, 2024 and sell it today you would earn a total of 1,484 from holding Wells Fargo or generate 35.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Workday vs. Wells Fargo
Performance |
| Timeline |
| Workday |
| Wells Fargo |
Workday and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Workday and Wells Fargo
The main advantage of trading using opposite Workday and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Workday 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.The idea behind Workday and Wells Fargo pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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