Correlation Between Wells Fargo and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Goldman Sachs 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 Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and Goldman Sachs Group, you can compare the effects of market volatilities on Wells Fargo and Goldman Sachs 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 Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Goldman Sachs.
Diversification Opportunities for Wells Fargo and Goldman Sachs
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wells and Goldman is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and Goldman Sachs Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Group 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 Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs Group has no effect on the direction of Wells Fargo i.e., Wells Fargo and Goldman Sachs go up and down completely randomly.
Pair Corralation between Wells Fargo and Goldman Sachs
Considering the 90-day investment horizon Wells Fargo is expected to generate 0.74 times more return on investment than Goldman Sachs. However, Wells Fargo is 1.36 times less risky than Goldman Sachs. It trades about 0.31 of its potential returns per unit of risk. Goldman Sachs Group is currently generating about 0.15 per unit of risk. If you would invest 5,673 in Wells Fargo on January 25, 2024 and sell it today you would earn a total of 421.00 from holding Wells Fargo or generate 7.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo vs. Goldman Sachs Group
Performance |
| Timeline |
| Wells Fargo |
| Goldman Sachs Group |
Wells Fargo and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Goldman Sachs
The main advantage of trading using opposite Wells Fargo and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Goldman Sachs 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 Goldman Sachs will offset losses from the drop in Goldman Sachs' long position.| Wells Fargo vs. Bank of America | Wells Fargo vs. JPMorgan Chase Co | Wells Fargo vs. Toronto Dominion Bank | Wells Fargo vs. Nu Holdings |
| Goldman Sachs vs. JPMorgan Chase Co | Goldman Sachs vs. Wells Fargo | Goldman Sachs vs. Citigroup | Goldman Sachs vs. American Express |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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