Correlation Between Yirendai and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both Yirendai 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 Yirendai and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yirendai and Wells Fargo, you can compare the effects of market volatilities on Yirendai 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 Yirendai with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yirendai and Wells Fargo.
Diversification Opportunities for Yirendai and Wells Fargo
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Yirendai and Wells is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Yirendai and Wells Fargo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo and Yirendai 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 Yirendai 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 Yirendai i.e., Yirendai and Wells Fargo go up and down completely randomly.
Pair Corralation between Yirendai and Wells Fargo
Considering the 90-day investment horizon Yirendai is expected to generate 2.84 times more return on investment than Wells Fargo. However, Yirendai is 2.84 times more volatile than Wells Fargo. It trades about 0.14 of its potential returns per unit of risk. Wells Fargo is currently generating about 0.28 per unit of risk. If you would invest 468.00 in Yirendai on January 26, 2024 and sell it today you would earn a total of 40.00 from holding Yirendai or generate 8.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Yirendai vs. Wells Fargo
Performance |
| Timeline |
| Yirendai |
| Wells Fargo |
Yirendai and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yirendai and Wells Fargo
The main advantage of trading using opposite Yirendai and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yirendai 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.| Yirendai vs. Lexinfintech Holdings | Yirendai vs. FinVolution Group | Yirendai vs. 360 Finance | Yirendai vs. Navient Corp |
| 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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