Correlation Between IMCO Industries and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both IMCO Industries 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 IMCO Industries and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IMCO Industries and Wells Fargo, you can compare the effects of market volatilities on IMCO Industries 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 IMCO Industries with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of IMCO Industries and Wells Fargo.
Diversification Opportunities for IMCO Industries and Wells Fargo
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IMCO and Wells is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding IMCO Industries and Wells Fargo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo and IMCO Industries 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 IMCO Industries 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 IMCO Industries i.e., IMCO Industries and Wells Fargo go up and down completely randomly.
Pair Corralation between IMCO Industries and Wells Fargo
Assuming the 90 days trading horizon IMCO Industries is expected to generate 1.72 times less return on investment than Wells Fargo. In addition to that, IMCO Industries is 3.36 times more volatile than Wells Fargo. It trades about 0.05 of its total potential returns per unit of risk. Wells Fargo is currently generating about 0.27 per unit of volatility. If you would invest 5,673 in Wells Fargo on January 25, 2024 and sell it today you would earn a total of 387.00 from holding Wells Fargo or generate 6.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 77.27% |
| Values | Daily Returns |
IMCO Industries vs. Wells Fargo
Performance |
| Timeline |
| IMCO Industries |
| Wells Fargo |
IMCO Industries and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IMCO Industries and Wells Fargo
The main advantage of trading using opposite IMCO Industries and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IMCO Industries 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.| IMCO Industries vs. Alony Hetz Properties | IMCO Industries vs. Melisron | IMCO Industries vs. Shufersal | IMCO Industries vs. Israel Discount Bank |
| 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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