Correlation Between Kerry and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both Kerry 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 Kerry and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kerry Group and Wells Fargo, you can compare the effects of market volatilities on Kerry 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 Kerry with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kerry and Wells Fargo.
Diversification Opportunities for Kerry and Wells Fargo
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Kerry and Wells is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Kerry Group and Wells Fargo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo and Kerry 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 Kerry Group 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 Kerry i.e., Kerry and Wells Fargo go up and down completely randomly.
Pair Corralation between Kerry and Wells Fargo
Assuming the 90 days trading horizon Kerry is expected to generate 53.77 times less return on investment than Wells Fargo. But when comparing it to its historical volatility, Kerry Group is 1.06 times less risky than Wells Fargo. It trades about 0.0 of its potential returns per unit of risk. Wells Fargo is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 4,953 in Wells Fargo on January 25, 2024 and sell it today you would earn a total of 1,141 from holding Wells Fargo or generate 23.04% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Kerry Group vs. Wells Fargo
Performance |
Timeline |
Kerry Group |
Wells Fargo |
Kerry and Wells Fargo Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Kerry and Wells Fargo
The main advantage of trading using opposite Kerry and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kerry 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 Kerry Group 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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