Correlation Between Wells Fargo and Primerica

Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Primerica 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 Primerica into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wells Fargo and Primerica, you can compare the effects of market volatilities on Wells Fargo and Primerica 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 Primerica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Primerica.

Diversification Opportunities for Wells Fargo and Primerica

-0.58

Correlation Coefficient

Wells Fargo  Primerica

Excellent diversification

The 3 months correlation between Wells and Primerica is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and Primerica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primerica 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 Primerica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primerica has no effect on the direction of Wells Fargo i.e., Wells Fargo and Primerica go up and down completely randomly.

Pair Corralation between Wells Fargo and Primerica

Considering the 90-day investment horizon Wells Fargo is expected to generate 0.6 times more return on investment than Primerica. However, Wells Fargo is 1.65 times less risky than Primerica. It trades about 0.27 of its potential returns per unit of risk. Primerica is currently generating about -0.07 per unit of risk. If you would invest  5,177  in Wells Fargo on February 20, 2024 and sell it today you would earn a total of  931.00  from holding Wells Fargo or generate 17.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Wells Fargo  vs.  Primerica

Wells Fargo

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Wells Fargo exhibited solid returns over the last few months and may actually be approaching a breakup point.

Primerica

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Primerica has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Wells Fargo and Primerica

The main advantage of trading using opposite Wells Fargo and Primerica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Primerica 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 Primerica will offset losses from the drop in Primerica's long position.

The idea behind Wells Fargo and Primerica 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.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.