Correlation Between Commonwealth Bank and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank 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 Commonwealth Bank and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Bank of and Wells Fargo, you can compare the effects of market volatilities on Commonwealth Bank 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 Commonwealth Bank with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Wells Fargo.
Diversification Opportunities for Commonwealth Bank and Wells Fargo
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Commonwealth and Wells is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and Wells Fargo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo and Commonwealth Bank 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 Commonwealth Bank of 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 Commonwealth Bank i.e., Commonwealth Bank and Wells Fargo go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Wells Fargo
Assuming the 90 days horizon Commonwealth Bank of is expected to under-perform the Wells Fargo. In addition to that, Commonwealth Bank is 1.44 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 0.18 per unit of volatility. If you would invest 5,779 in Wells Fargo on February 7, 2024 and sell it today you would earn a total of 240.00 from holding Wells Fargo or generate 4.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Bank of vs. Wells Fargo
Performance |
| Timeline |
| Commonwealth Bank |
| Wells Fargo |
Commonwealth Bank and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and Wells Fargo
The main advantage of trading using opposite Commonwealth Bank and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank 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.| Commonwealth Bank vs. Bank of America | Commonwealth Bank vs. Bank of America | Commonwealth Bank vs. Bank of America | Commonwealth Bank vs. Bank of America |
| 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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